CVC Unplugged: How Sopra Steria fixed a CVC strategy that wasn’t working

How do you reposition a corporate venturing unit that has grown haphazardly and without much purposeful direction? This was the challenge facing Socheat Chhay a year ago when he came in to head up Sopra Steria Ventures.

The investment arm of the Paris-based IT company Sopra Steria had been in operation since 2018, but it wasn’t delivering what the group needed. The team had started as just two people who reported to the executive committee. They had made some opportunistic investments, taking LP positions in other funds, starting with fintech and cybersecurity, and had made a couple of direct investments.

“The innovation strategy was a bit headless with no tangible results,” says Chhay on the CVC Unplugged podcast.

By the end of 2022, the unit had five LP positions and two direct equity investments, aiming to gain exposure to fields like deep tech, e-commerce, quantum computing and more. But all of this was done without much in the way of a formalised structure, process, or roadmap.

“It wasn’t really thought through, but the main idea was to actually get exposed to the innovation ecosystem through startups and get exposure to market trends,” says Chhay. But the investments weren’t really in line with where the top management team wanted the company to go in the next two to five years.

Sopra Steria was also not getting value out of the portfolio. The company could only work with the two direct investments, not the startups invested in by the VC funds it had backed. Many of those startup were, in any case, already quite mature and potentially working with Sopra Steria’s competitors.

There needed to be a wholesale rethink of the unit’s purpose, vision and mission, says Chhay, along with a better framework for how to execute, and new governance processes.

The shift to early-stage investing

Chhay shifted the strategy to investing at an earlier stage – between seed and series A – so that it could get involved before startups got too far along the development curve. This meant they could get more value-add from the corporate and commercial partnerships could be struck early on, and while the startups are perhaps not yet too involved with the parent company’s competitors.

Now, initial investments range in size between $150,000 and $1.5m in European startups in areas like cybersecurity, artificial intelligence, quantum, deep tech, virtual reality, SaaS, proptech, B2B finance and more, while also gaining exposure to more tangential tech like sustainability and space through LP positions. Money is also set aside for follow-ons.

One of Chhay’s conditions of joining was having a reporting line conducive to success, and currently reports directly to the group’s vice chairman, who also heads up strategy and software. He wants to see tangible strategic results within three to five years, the KPIs for which can include the number of pilots and collaborations between startups and business units, as well as countries reached within the portfolio.

Since Chhoy joined, Sopra Steria Ventures has backed seven startups, effectively doubling the size of its portfolio in a single year. Recent investments include a €1.8m ($1.9m) round for virtual reality technology company Skyreal and an $8.5m series A round for wholesale financing and loan service company Vero Technologies.

Mending fences

When you come in to turn a ship around, you hardly ever start with a clean slate. Chhay had to figure out a way to manage the existing portfolio companies and find how to get strategic value from them. The first thing to do, though, was gauge where the relationships stood.

“When I came on in March 2023, my first task was actually speaking with them,” says Chhay, “I’d said: Okay, how much would you rate your relationship to [the venture unit and the parent] prior to 2023?”

The results of this informal poll showed that portfolio companies’ relationships with Sopra Steria Ventures were okay, but the score was lower when asked about their collaborations with the parent company. A company that’s been around for over half a century knows how it does business, and that comes with a self-assuredness that can rub startup founders the wrong way.

“To work with startups, you need a certain DNA,” says Chhay. “Some business people who have 30, 40 years in the industry – they could be felt as very patronising. ‘This is the way that you do this, I know my market, you’re very small.’  That speech, coming from business to a startup founder who’s trying to do his best, is a bit off in terms of DNA.”

Businesspeople who had never been entrepreneurs struggled to understand the pressures of startups, and they could be overly pushy as clients. A big corporation can account for a large chunk of a startup’s business, giving them leverage which, if applied aggressively, can derail a startup’s plans. Further, if an investor wants quick results and doesn’t see them, that can lead to impatience, which can itself give way to friction.

A less controlling relationship is a better relationship.

When Chhay asked for an updated rating to see where those same relationships stood at the end of 2023, however, there was marked improvement. A tangible result to take to the executive committee.

Vision as a product

Coming up with a new direction is one thing, getting people on board with it is another.

“Have we done that before? Why are we doing that? Why are we still in that?” These, says Chhay, were the main questions senior leadership wanted answered. “We needed to have a North Pole.”

Getting senior leadership on board is much like a product adoption curve – your vision is the product. Each person is like a customer with a persona, each has their own needs, expectations and motivations.

“You’ve got the early adopters, you’ve got the in the middle, and then you’ve got the late entrances. It’s just about taking the early adopters in, and, with results, convince the [majority of the rest]. which hopefully, I believe that now we’ve reached that stage,” says Chhay.

There are, of course, detractors, and some folks who are too sceptical to come fully on board, but the best you can sometimes hope for is to move that needle from “why are we still doing this” to seeing that the venture project at least brings some benefit.

Above all, says Chhay, when starting on a new endeavour like this, the most important thing to get things off the ground efficiently is seeking help from those who’ve been there before. “Do not hesitate to reach out to other peers who have been in the same situation as you are. Try to understand very quickly why it is not working, why it is not functioning. And if it isn’t, do I have some other peers that do understand where you’re coming from? Who understand your pains, and were they able to solve them?”