GCV Symposium Day Two: The morning session

The second day of the Global Corporate Symposium started with a university venturing panel moderated by Global University Venturing editor Thierry Heles discussing how to build and develop a startup, from idea to scale-up.

The panel featured Paolo Bavaj, head of corporate venturing at adhesive product maker Henkel Adhesive Technologies; Mark Brooks, associate director of innovation and strategic partnerships at the Association of International Certified Professional Accountants (AICPA); Ilonka Jankovich, venture partner at Randstad Innovation Fund, a subsidiary of recruitment firm Randstad; and Jim Wilkinson, chief financial officer of Oxford Sciences Innovation (OSI), the university venture fund of University of Oxford.

AICPA launched a startup accelerator in 2017 to fuel disruptive technology in the accounting industry, partially through automation, and has provided an inaugural group of four startups with seed money and access to market expertise and leaders.

Brooks said: “The accounting profession is going to change profoundly over the course of our lifetime, mainly because of automation processes with AI and blockchain, and also because the way people are learning is changing.

“These changes are the reason why we started looking at startups. because we know that the most provocative and coolest innovation emerges from them.”

Shifting to his experience at OSI, Wilkinson said: “The problem was that we had great innovation coming out of the university but had no way to fund it. With OSI, our aim is to bring in shareholders to help us scale up, and get industry contacts and management teams in, which we could not do otherwise.”

Launched in 2015, OSI has since raised £600m ($800m) in capital and backed 50 university spinouts, some of which have achieved £100m+ valuations.

Aiming to exploit and commercialise research from academic departments across the university, OSI has about 70 shareholders who regularly come to its offices in order to review innovative ideas relevant to their sector.

“Once we have spun out a company we try and make sure that it goes on to work with industry leaders,” Wilkinson said.

Jankovich stated the importance of putting certain systems in place and standardising processes, saying: “It is really about putting some very simple metrics in place. We collect data on usage and we really want to track value. Once we have a clear business case we can start scaling up.

“You really need to introduce and drive these processes into your internal business,” she added, “or else people just go home and forget about it.”

Another common practice at Randstad, Jankovich explained, is to organise client days during which investors can come in and meet the entrepreneurs, which allows interactions between both sides.

“We also talk to our board of directors every few months to let them know about the progress of invested companies, so that they are on top of everything,” Jankovich added, though the greater challenge is to manage reaching out to the entire organisation.

The next panel, moderated by Oliver Keown, senior associate for healthcare investing at General Electric’s corporate venturing unit, GE Ventures, brought together healthcare industry leaders around a discussion on how to generate access to intellectual property.

Roel Bulthuis, senior managing director at Merck Ventures, part of pharmaceutical firm Merck Group, was joined by Neil Foster, partner specialised in M&A and private equity at law firm Baker Botts, Deborah Harland, partner at pharmaceutical group GlaxoSmithKline’s SR One unit, and Francesca Wuttke, managing director of the European branch of Merck Global Health Innovation Fund, a subsidiary of pharmaceutical company Merck & Co. 

Asked how an agenda for access to IP and innovation was driven within their respective organisations, Bulthuis stressed the importance of building relationships with other industry players to maintain a reputation and drive success.

“Having a relationship with others is important,” he said. “The reputation you create as an investor in that industry has a big impact on the ability for the parent company to access innovation. Our key impact is to create a network, and a profile that makes people want to work with us and see us as a valuable partner.”

The healthcare industry, Builthuis added, puts about 20% of its budget into research and development, which has led to a very mature VC and business development culture. As an early-stage investor, Merck Ventures dedicates around half of its investments to seed rounds, with the rest going into larger syndicate deals. 

“We have to make sure that commitment and resources are engaged there, bearing in mind that we need to take an active role in shaping companies that can help our parent company grow,” he added.

Foster then highlighted the “cultural clash” between the technology and pharmaceutical worlds, where best practices have not entirely been established yet and bad practice can still be quite common.

“The biggest disruptors in biotechnology are in digital and devices, as opposed to pharmaceuticals,” Foster said, adding that intellectual property registration remains a much more common practice in the US than in Europe. 

The panellists concluded by covering the growing importance of data and data management in the healthcare world, especially in relation to the recently enacted General Data Protection Regulation (GDPR) regulation in Europe.

Foster noted that data in the healthcare world, including for instance patient information, had been heavily regulated for many years already, particularly in the US and Europe.

Bulthuis explained that progress in data technology meant pharmaceutical companies now have the ability to not just invest in therapeutics, but also in a wider selection of life sciences technologies.

The impact data could have on the sector as a whole also generated discussion on pricing, with patients expected to soon be able to monitor their own health to a greater degree.

“The access to data also means we can widen our scope, and not just sell new products but also think of how we can develop new drugs and new types of therapeutic solutions,” Bulthuis said.

Antoine Maurel, investment manager at Orange Digital Ventures, a subsidiary of telecommunications firm Orange, then moderated a session on corporate venturing in emerging markets, with industry leaders discussing the booming business opportunities currently emerging from Africa and India.

In spite of some obvious differences, India and Africa share a young and fast-growing population, and both are right in the middle of a technological and digital boom.

Krishna Chokhani, managing partner at India-based accelerator Zone Startups India, told attendees the average age of a startup founder in India at present is 28, while according to official figures 50% of the country’s 1.3 billion population is below the age of 25 and 65% below 35. 

United Nations figures indicate Africa’s population is set to grow by about 40% over the next 10 years, while about 19% of its population are aged 15 to 24. Something that has also characterised India and Africa in recent years is their technological transformation and progressive transition into the digital age.

Eric Osiakwan, managing partner at Chanzo Capital, a growth capital firm targeting the “KINGS” countries (Kenya, Ivory Coast, Nigeria, Ghana and South Africa), said that although Africa is behind in terms of funding raised (roughly $560m in 2017 compared to $13.5bn in India), its digital progression is still to come.

Another characteristic shared by both areas is their booming technology and digital space. Osiakwan told attendees that in Sub-Saharan Africa the mobile industry currently accounts for 6% of GDP, and both regions are experiencing rapidly growing internet penetration among their population.

Chokhani and Vishal Ramaswamy, growth strategist at the Bangalore-based office of US-headquartered investment data provider Tracxn, said that India is still in the process of digitising many essential components of what forms a “modern” society

Despite that, 200 million bank accounts have been opened and 1.2 billion social security numbers generated in recent times, according to Ramaswamy, and India is slowly moving towards disruption.

Chokhani said: “The most famous companies in India are currently in e-commerce. They are filling the gaps in the ecosystem that need to be filled, with digitisation still being the prime focus. Filling those gaps will take a bit of time, but it will also yield good profits for investors.”

At present, traditional VCs account for 40% to 45% of the funding ecosystem in India, with corporate venture capital accounting for roughly 20% and the rest represented by angel investors.

“As the Indian ecosystem matures, so will the CVC space,” Chokhani said. Although the largest part of businesses are currently involved in [business-to-consumer] activities, there should also be a shift towards [business-to-business] over the years.

As India’s startups progressively transition from one side to the other, the country has dreams of becoming “the software-as-a-service (SaaS) hub of the world”, Ramaswamy said, adding that there are more than 900 SaaS companies in the country at present including 700 operating in the deep-tech space.

Ramaswamy said: “The government is doing quite a bit to push the country’s digitisation. The foundations of technology are currently being laid, and soon all villages will be connected with broadband.

“Once that is done, we can progressively move towards innovation, machine learning, and building more ground-breaking services and products.”

Some engagement with early-stage businesses in India has already started creating the local landscape, according to Ramaswamy.

Africa is meanwhile poised for a “tech take-off”, as the telecoms, media and technology (TMT) sector has consistently outperformed other sectors over the past 10 years, generating 19% of annualised returns over the period, Osiakwan said.

Finally, Africa and India have benefitted from an increased foreign presence. Roughly 60% of India’s 500+ active venture capital investors are locally based while the rest are of international origin, according to Ramaswamy. In terms of value that ratio is reversed, with foreign investors supplying 65% of the funding.

Referencing US-headquartered Walmart’s recent acquisition of a majority stake in India-based e-commerce company Flipkart at a valuation of almost $21bn, Ramaswamy said: “Everyone wants a piece of pie of what is happening in India right now. This deal has totally shaken up the local ecosystem.”

Osiakwan responded by stating that in Africa “a lot of local investment is going into the lower end of the market, while foreign investors tend to operate in the larger space. Global money is totally changing the landscape.”

Recommending that investors in the room keep an eye on Africa in the near future, Osiakwan added: “Necessity is the mother of innovation, and Africa is the continent that has the most necessities. That is why you must look at it now.”