GCV musters CVCs at its first digital forum

Throughout the conference using pre-recorded and live discussion, the two principal messages participants had were corporate venturing is here to stay and there is a shift from west to east even in a time of unprecedented stress and loss in society generally, reflected in the general mood with Blackout Tuesday.

GCV will plan a follow-up virtual or hybrid conference as people start to emerge after the summer, and this will lead us into the next GCVI Summit in Monterey, California, on January 27 and 28, while our postponed GCV Symposium will take place on December 7 and 8.

CVCs step up together

The members of the GCV Leadership Society Advisory Board, chaired by Young Sohn from Samsung, shared their perspectives on how communities can come closer together through these trials and create more diverse and inclusive investing environments. Samsung Next shared its playbook for this at the Forum and beyond.

The Forum’s 600 attendees created a unique network and sharing of insights.

To take a sample, Mach49 chief executive Linda Yates spoke about how enthusiastic attendees were and lessons for live and digital events: “It was crazy as all these people wanted to continue so we did a spontaneous Zoom meeting with about 15 people and then people who joined late asked if we would do it again so they could ask questions. Pretty cool and a good lesson for the next digital one, we will automatically set up a Zoom and post it for folks to go to if they want to continue the dialogue. And even at the live events, say, we can take a meeting room and say ‘hey, if people want to continue the dialogue come to this room’.”

Not all the conversations were so public, as a series of private non-disclosure agreement sessions run by David Stevenson at Merck and Michael Celiceo at Clarity unpicked the strategic direction corporate venturing can take, and how to engage with a wider set of stakeholders.

The core message was to “evangelise the idea that CVC is here to stay”.

Touchdown Ventures president Scott Lenet and partner Beth Kearns ran a short poll during their session, Shifting Gears: Commercial Deals, that found while some corporations were slowing down their new investments, others were keeping up their pace (something news editor Rob Lavine will testify to, after the second biggest news week for GCV before the forum).

And corporations are becoming increasingly aware of their power to support portfolio companies and entrepreneurs more broadly, through being a customer or a supplier. The second question in Touchdown’s poll surprised Lenet, as nearly half the respondents said their corporate parent had strategic or commercial relationships with about three-quarters of their portfolio companies.

Andrew Fisher, senior director at US restaurant group Chick-fil-A’s Red Wagon innovation unit, won Touchdown’s Who’s the Smartest CVC game over ‘quarantinis’ at the end of the first day, and promptly donated the prize to the Centers for Disease Control and Prevention. (Touchdown’s chief executive David Horowitz runs these quizzes each Sunday to raise money for the CDC. Let GCV know if you are interested.)

The spirit of generosity and consideration ran through the entire forum, as Samsung Next shared its playbook and survey for thinking through more diversity and inclusion among portfolio companies. Speakers pointed to the need to use innovation to make a positive impact on society and to join up across governments, universities – including from the powerful SETsquared ecosystem – and corporations as well as other venture investors.

Jim Wilkinson, interim CEO of Oxford Sciences Innovation, celebrated its fifth anniversary of starting a £600m fund to primarily support University of Oxford spinouts, said: “Such a lot has happened. The next five years should be really exciting as our portfolio companies begin to show results!” Some of the spinouts are already producing Covid-19 vaccines.

The time is now more broadly for innovation to meet capital, which will be the theme for our GCVI Summit in California on 27-28 January.

One of the attendees at the Digital Forum, SoftBank, announced a $100m Opportunity Growth Fund to invest in companies founded by people of colour and will waive a management fee or carry.

As Inga Müller, senior operations manager at EnBW New Ventures, posted on social media: “My favourite quotes of the day came from [head of Munich Re Ventures] Jacqueline LeSage Krause on positive change that can come out of the corona crisis: ‘The status quo is a decision.’”

BLCK VC hosted a virtual event, We Won’t Wait, after the Digital Forum. Attendees concluded it is time some practices came to an end – that is the true opportunity for change through innovation.

Innovation shift and crowding in capital

It is hard to grasp the rapid shift in balance of innovation potential currently underway from the west to the east, and the interest is shifting from what Silicon Valley does to what Shenzhen and Beijing are up to.

In South Korea, conglomerates that had been restricted in owning financial units will be allowed to establish corporate venture capital (CVC) units under their holding groups, according to the latest economic outline from the finance ministry, reported by Pulse.

Deregulation could be in place by September, allowing conglomerates to establish CVC subsidiaries. This partly reflects the facts on the ground as Samsung, LG, Hyundai, SK, Lotte and Naver have been increasingly active CVC investors through workarounds, but it comes as pressure grows on economies to fund innovation as a way of bouncing back from the coronavirus.

South Korea plans $62bn in funding in a New Deal targeting the digital and green economy, while Europe last month said it intends to invest about $100bn in innovation funding over the seven years from 2021.

For context, however, China’s big two conglomerates – Tencent and Alibaba – are planning a combined $100bn of deep tech investments over three to five years.

Tencent, which is reportedly buying a $200m stake in Warner Music Group to go with minority stakes in Spotify and Universal Music Group in addition to its own Tencent Music streaming business, issued $6bn of loan notes to help pay for its $70bn program of corporate venturing and investment.

As Martin Lau, president of Tencent, a member of the GCV Leadership Society and on its advisory board, said: “We are pleased with the positive response to the notes, demonstrating investors’ recognition of our fundamental business resilience, which enables us to sustain robust cashflows while fulfilling our responsibilities to society.”

Sovereign states

The underlying message of the second day of the GCV’s first online digital conference centered on the necessity for collaboration and connection between investors and other parties involved in the process of venture investing, but also reflected differences across countries.

For example, Alvin Graylin, China president at HTC, pointed out virtual reality adoption in China was much bigger in the business-to-business (B2B) than the business-to-consumer (B2C) market in the east compared with the west.

Futurist and author Rohit Talwar presented four scenarios for the unfolding of the coronavirus crisis and discussed different industries and technologies whose development may be accelerated by it.

More importantly, though, he spoke briefly of impact investing and noted that there may be a powerful player entering the field, noting that sovereign funds “woke up to impact investing last year”. Sovereign funds have more potential to be a powerful co-investor, not only in impact, but also the innovation space as a whole.

Patrick Child, deputy director-general of the European Commission, in a prepared keynote, spoke about the recently proposed €750bn extra lending capacity proposed by president Ursula von der Leyen in addition to the €1.1 trillion proposed in the new EU budget for 2021-2027. He called it “a great opportunity to invest in the next generation of the EU”.

Bindi Karia, adviser at European Innovation Council, noted that the EU is now engaged with private equity, venture capital, public and crossover funds in a bid to create an effective public-private partnership. She underscored the importance of letting “private investors do what they do best”.

Shiva Dustdar, head of division Innovation Finance Advisory at European Investment Bank, joined Oxford Sciences Innovation’s Jim Wilkinson; Elizabeth Boggs Davidsen, director of SDG Impact at United Nations Development Programme; Gwennael Joliff-Botrel from the European Commission; and Jon Lauckner, president of General Motors’ corporate venturing unit, GM Ventures, and talked about how governments are providing the billions, and looking to corporations to bring the trillions of dollars on their balance sheets, to tackle the sustainable development goals laid out by the UN.

In a similar vein, Modwenna Rees-Mogg, cofounder of Athla Capital, expressed her appreciation of the culture among another class of co-investors which is vital for earlier stage companies: “The culture of angel investing has driven a spirit of generosity and that will deliver multi-fold returns in the long run.” She also spoke of another class of investors, family offices, and ventured an opinion that they will likely reallocate more capital to alternative investments than previously, though she acknowledged that it is “hard to invest in dozens of illiquid companies”.

Lauckner has been doing exactly this in building a stellar portfolio (not all public) over the past decade to help GM prepare for the triple wave of disruption of electrification, ride sharing and autonomous vehicles. After 41 years he will leave behind a company with a powerful CVC unit and team, similar to what David Gilmour, head of BP Ventures, has achieved for the energy major.

Fortunately, both will stay involved in innovation and venture, and in the GCV ecosystem, to pass on their wisdom. As Gilmour said in his opening discussion, “what I wished I knew about CVC when I started was to effect change faster”.

CVCs stepping up

The overarching theme and message of corporate investors during the GCV Digital Forum revolved around the fact that this class of investors remains seeking to help, engage with and invest in existing portfolio companies and new ones.

Gilmour stated that, in the post-pandemic world, “corporate venturing and R&D innovation will need to be more integrated” and stressed that BP Ventures, despite the challenges in the oil and gas industry, is still seeking to work with startups. Gilmour also said he would still be engaged in the venturing world after stepping down from his position, as he finds the work with the startup and scale-up community to be extremely rewarding on a personal level.

Amy Banse, managing director and head of funds for Comcast Ventures, the venturing subsidiary of media group Comcast, reiterated this message of investors’ willingness to continue to engage with the innovation business community, particularly in areas ripe for fundamental shifts: “There is a lot of disruption going on and we are starting to see some interesting companies emerge in the spaces that are being disrupted and we do not want to sit on our hands. We want to meet them, engage with them and, where appropriate, invest in them.”

This does not mean that the engagement corporate investors seek is oriented only towards the new opportunities – far from it, in fact. Banse also emphasised the work her team had to do in March and April to support portfolio companies: “We pushed the ‘pause’ button in the middle of March and decided to spend our entire time on stabilising and helping our portfolio companies.”

Jacqueline LeSage Krause, managing director of Munich Re Ventures, the venturing arm of reinsurance firm Munich Re, also stressed the empathy that her team had been trying to convey in communicating with portfolio companies: “We are cognisant this is a very challenging time for them.”

Tarik Galijasevic, head of Allstate Strategic Ventures, the venturing arm of insurance company Allstate, said: “We are very much here to help startups, engage with them, help them solve a problem and use them for the right strategic cases for us but, at the same time, make sure those startups have a great future,” alluding to the fact that corporate venture investors are not merely another capital source for equity funding but also a potential anchor customer which can provide them with revenues that will be critical for surviving the downturn.

Lauckner summed up the differentiating proposition of corporate VCs by stating it from the perspective of a startup: “All startups have a common problem – identifying their first customer!” He spoke of the considerable impact a corporate VC investor can have on the future of a budding tech startup in the automotive space by having the parent corporation become one of its major customers.

In addition to funding and becoming a partner, some corporates also have their know-how and experience to offer to their investees. LeSage Krause commented on the quick reaction of the community toward the unexpected shock of the pandemic: “We saw quick alignment between entrepreneurs and investors and I think part of that was accelerated by those of us for whom the 2008-2009 financial crisis is a memory that resurfaced.” Krause compared the current crisis with the world financial crisis of 2008 and said that main difference lay in the larger impact on Main Street.

There was also a warning about the potential pitfalls of falling into the trap of a short-term mentality among founders. Tom Vanhoutte, partner at Imec.xpand – the early-stage and growth fund Belgium-based nanoelectronics research institute Imec, warned that “trying to leverage the Covid-19 situation to the best interest of the company could potentially turn against the company in the long run”. Galijasevic concurred and added that he viewed the Covid-19 crisis as “a tailwind for some but not for all”.

Girish Nadkarni, head of Total Carbon Neutrality Ventures, the venturing unit of oil and gas major Total, also mentioned how having established contacts with other co-investors in the past has facilitated the communication with them during the lockdown: “We are quite used to interacting with investors electronically or digitally. We have met them in person at conferences such as the ones you organise. This makes it a lot easier.”

Nadkarni also mentioned that the lockdown has made some of the due diligence process more difficult, especially for companies whose industrial facilities across borders cannot be visited or inspected now. However, he stressed his team has been able to count on other trusted co-investors who may have performed part of such due diligence tasks. Nadkarni’s colleague Ademidun (Demi) Edosomwan, managing director of Emerging Markets, summed up the situation as “solidarity among investors”.

In the final panel, Jasper Bos, the head of M Ventures, the venturing unit of Germany-based pharmaceutical company Merck KGaA, shared with the rationale behind the co-investment fund it M Ventures has set up: “We see more opportunities than we can [possibly] invest in.” Bos also added that corporates are particularly good at overcoming a knowledge gap when investing in nascent pharmaceutical enterprises. This was a particularly timely remark when the entire world looks to the pharmaceutical industry in the Covid-19 crisis.

Gen Tsuchikawa, CEO and chief investment officer at Innovation Growth Ventures at electronics producer Sony, commented that communication with investors is important: “You need to watch capital markets carefully. I think there will be areas where money is more abundant and others where it is scarce. Also, exchanging information with your colleagues from other funds as to where they are putting their money is quite important in the post-Covid-19 environment.”

Ladi Greenstreet, head of EMEA at Accenture Ventures, the venturing vehicle of consulting firm Accenture, reminded attendees about the crucial role corporate venturing units play in helping corporations navigate the troubled waters of technological disruption. They “help [corporate] parents be big and nimble” at the same time by unlocking value that emerging companies may create.

Michael Celiceo, a managing director at Clarity PR, added: “Marketing and PR professionals from many of the world’s top corporate venturing firms also got together to discuss how they are using communications strategies and techniques to reach entrepreneurs, executives, investors and stakeholders. Issues discussed during the roundtable included how CVCs are helping portfolio companies reach audiences through PR campaigns to the best ways social media is used to increase awareness for CVCs and investors.”

Media roundtable

Can you still make money in the media industry and who is it for? These were two of the questions tackled by the media roundtable at the GCV Digital Forum on June 4. Yes, but it is harder than ever and the pressure on traditional media from advertising and classifieds moving to internet intermediaries, such as Facebook and Google, remains intense. This leaves concentrating on a niche market or moving into vertical market reinvention through business to business data analysis.

It also creates disinformation concerns. Automated content creation and dissemination allows truth to be surrounded by falsehoods.

Monetarising or making the costs of content creation, production and distribution through new technologies is creating new opportunities, whether
it is Babbel selling 10 million in

translation subscriptions, Syte.ai for visual search and image recognition, HourOne.ai as synthetic video generation or Vault AI for predictive analytics for content.

Events and trade shows, decimated by the travel restrictions from the Covid-19 pandemic, have moved online, while sports and concerts are seeing expansion through gaming platforms, such as Fortnite and in combination with AI.

The next big leap forward will be when the consumers of media shift from people to machines. As 5G communication technologies enable billions of sensors to feed information directly to AI for analysis and back for action, information consumption will scale up still further. Content is king.

The future for the industry remains bright, just for a different audience.