GCVI Summit: Day 1 review

The Global Corporate Venturing and Innovation (GCVI) Summit 2017 for more than 450 attendees from about 200 corporations opened when Sue Siegel, chief executive of conglomerate GE’s corporate venturing unit GE Ventures, said the industry’s “time is now”. 

Siegel as co-chairman of the GCVI Summit officially kicked off the event yesterday in Sonoma, California, after a pre-event workshop and dinner for the top 100 Global Corporate Venturing Rising Stars awardees on Tuesday with her statement that the new venturing ecosystem was being built around helping entrepreneurs and collaboration.

Siegel, in an interview by John Riggs, principal and partner of innovation and corporate venturing at PwC, noted that many changes have been occurring over the recent past, with CVCs now financial and strategic organisations that are considered bridge builders rather than islands.

However, “CVC in its primary incarnation is still indispensable,” Siegel noted, because the mere ability to invest is a validation of a corporate’s ability to understand where the markets were going.

Corporate venturing divisions still face challenges – while emerging technologies are very powerful, investors need to find a sustainable model to fuel growth, which can be a challenge for units with large parents. GE, Siegel pointed out, was some 120 years old and dealing with a scale of disruption that has never happened in its industry before.

Looking ahead to the future, Siegel said that following the launch of five companies by her unit so far, GE Ventures was preparing to conduct more such deals with several in the pipeline for 2017. Particularly, she said, additive manufacturing would be a very big area for GE.

Siegel, much like other speakers on the first day, also took a moment to talk about diversity. GE Ventures, Riggs noted, has always been hailed as a leader at GCV events, making Siegel joke that she personally skews the numbers because she brings three diversity factors to the table, being “an ethnic minority, a woman… and short”.

She was later joined onstage by Peggy Johnson, executive vice-president of business development at the company and born 14th of 15 children in an Irish Catholic family, who was interviewed by Siegel (both pictured, Johnson on left).

Johnson previously worked for semiconductor manufacturer Qualcomm, responible for the Qualcomm Ventures when it was led by Nagraj Kashyap but joined Microsoft at a time when it began undergoing significant strategy shifts following Satya Nadella’s appointment as chief executive. She brought considerable expertise with her, having been responsible for developing the world’s first app store for Qualcomm in 2001 – many years before the iPhone even existed.

Johnson noted that Microsoft was initially quite averse to launching an investment fund, saying if the company wanted to invest it could just do so from the balance sheet – however, such deals were not actually occurring and opportunities were missed.

With a green light from Nadella, Johnson promptly hired Kashyap to spearhead the changes at Microsoft Ventures, with Johnson noting that he brought the chip maker’s approach to Microsoft’s investment arm.

Interestingly, Johnson said  no business unit in Microsoft could veto Microsoft Ventures’ decisions in order to leave the investment unit free reign over opportunities. A theory that, Johnson remarked, Microsoft Ventures “has tested a couple of times”.

Microsoft Ventures now acts with three distinct levers: early and late-stage investments, partnerships and acquisitions. They are used for different reasons at different times, but always with the one question of whether it solves a specific problem for Microsoft.

On diversity, Johnson said that Microsoft Ventures had the great opportunity to build a team from scratch starting with Kashyap, but that it was less about ticking boxes and much more about having a team made up of members with diverse networks and ideas – which organically resulted in a highly diverse team for gender and ethnicity as well.

With 19 deals struck since July, Kashyap has used the diverse ideas generated by his team of seven to cover a range of areas but his impact has been more far-reaching, according to Johnson in her scorecard of the team. Kashyap had introduced Microsoft to Maluuba as a potential investment last year but the Canadian startup focused on giving software a better understanding of human language was so relevant Microsoft bought it earlier this month as a form of talent acquisition.

In another scorecard update, Tami Hutchinson, chief of staff to the president at Intel Capital, also discussed the changes at the division since Wendell Brooks took over 12 months earlier.

Brooks promised fewer, but larger scale, investments when he outlined his vision for Intel Capital at the GCVI Summit a year ago, and these have led to positive changes, according to Hutchinson.

Intel Capital previously led approximately half of deals, whereas it now leads more than 80% . Hutchinson noted that the unit was very proud of that achievement and felt like it was moving in the right direction.

Brooks made significant structural changes, most importantly dismantling existing teams, which each used to focus on one specific area of expertise such as M&A or intellectual property, and reshuffled them to end up with teams that contain an expert on each topic. The change has meant that Intel Capital was moving much more efficiently in closing transactions, she said, and by still committing similar amounts of money each year but to fewer deals was having more of an impact on the chip company’s strategic issues. 

Speakers across the first day debated a wide range of mega innovations, including autonomous vehicles, communications and mobile technolgy, artificial intelligence, augmented and virtual reality, bioengineering and internet of things (IoT).

On the latter, Amit Chaturvedy, head of internet of things, acquisitions and investments at networking equipment manufacturer Cisco, and Jay Eum, co-founder and managing director of Translink Capital, said there had been a rapid change in impact.

Two or three years ago, Chaturvedy said, there were no businesses making money in IoT, so Cisco decided to start identifying opportunities in that area. He underlined that IoT really was not a single sector, but rather an ecosystem play where no one company is handling the entire supply chain.

That ecosystem reality is complicated for startups by the fact that IoT’s uses vary vastly by geography. In China, the technology is used primarily in manufacturing to track assets, while in Europe it is being used to develop smart cities.

This produces issues in scaling up companies: to tackle an entire ecosystem is a daunting and difficult proposition. But opportunities abound, and Chaturvedy noted that Cisco was particularly keen on drones and agtech – though the corporate has yet to identify the right startup in the former sector.

Cars also offer a potential for disruption. As Chaturvedy underlined, the one product people tend to use most apart from their smartphone is the car – and even with an estimate of 50% of automobiles on the road by 2025 being connected, that was still a massive disruption.

While a breakout session on automotive, mobility and the future of energy was conducted by Tom Whitehouse, chairman of London Environmental Investment Forum, and GCV reporter Kaloyan Andonov elsewhere, on the main stage the differences between China and the western world were picked up by a panel discussion headed by Martin Haemmig, adjunct professor at Cetim.

The panel included Jeffrey Li, managing partner at internet company Tencent, Chris Evdemon, partner at Innovation Works and chief executive at Sinovation Ventures, Denis Barrier, managing partner at Cathay Capital, and Alvin Wang Graylin, China regional president of Vive, the VR platform of consumer electronics producer HTC.

Graylin noted that his company has conducted approximately 50 deals in the VR ecosystem over the past year, with 20 out of those in the US.

Tencent’s figure for the US came in at a similar 15 to 20 deals – though Li noted that these tended to be very early-stage conducted by a small team located in Palo Alto. However, Li said such “mega innovations require collaboration”.

The panel largely agreed that China would be a global innovation centre by 2020, and in some regards already was now. The country produces five times more engineering students than the US, though currently the best talent still goes to Silicon Valley because Mandarin is a significant barrier of entry to attract foreign talent into China, making it difficult to build diverse teams.

Barrier however pointed out that China is already leading in mobile consumer products and a force to be reckoned with in areas such as shared bikes.

Both Li and Graylin underlined how their ambition for the year is to close 100 deals, strengthening their global position as established investors.

Max von Zedtwitz, professor at GloradCenter for global R&D and innovation, who took the stage immediately after, further showed how the US and China are comparing: out of 6,432 research and development centres across the world, 2,308 are owned by US companies and 212 are owned by Chinese businesses. 

Tim Draper, founder of Draper Associates and DFJ, meanwhile was interviewed by Ilya Strebulaev, professor at Stanford University’s Graduate School of Business, and spoke about how the VC and CVC world is at an inflection point that will either see valuations shoot up or come crashing down.

Draper also cautioned CVC leaders that investing in private companies was a very long game and noted that he has seen a lot of corporates come in at the peak and leave at the trough. He was also the first speaker to tackle US president Trump’s protectionism and aversion to immigration: both scare Draper, who has funds all over the world and whose portfolio companies are majority founded by immigrants.

Draper was heartened by the Women’s March on Washington DC and across the world one day following the inauguration, yet warned that this needs to be but the first step of increased activism.

Moving back to the VC world, he noted that he is aiming to figure out the liquidity problem, stating: “If you own $1bn worth of Uber shares, you cannot buy yourself a cup of coffee.”

Tom Heyman, president of pharmaceutical firm Johnson & Johnson’s investment subsidiary Johnson & Johnson Innovation – Johnson & Johnson Development Corporation (JJDC), then spoke to Ram Jambunathan, managing director of the SAP.io Fund, about JJDC’s activities.

Heyman underlined the importance of managing a portfolio, warning that otherwise issues will arise that could have been caught early on and dealt with. For J&J, managing that portfolio is important because its plays tend to be very long term: drugs can take 10 to 12 years to develop, with several clinical trials and regulatory approval procedures that means the corporate will need to assist its investees.

JJDC, Heyman said, even makes follow-on investments when the startup is no longer strategically important but may yet lead to a good financial return.

Just before lunch, James Mawson, founder and editor-in-chief, retook the stage to discuss the findings of The World of Corporate Venturing 2017 report, a complimentary hard copy of which was distributed to delegates earlier in the day. More about this flagship publication can be found in his editorial here.

The afternoon saw several breakout sessions, including a workshop on government venturing from our sister publication GGV, which will be separately detailed in an editorial on that site on Monday.

Following these, back on the main stage, Michael Kim, founder and managing partner at Cendana Capital, Tim Connors, founder of PivotNorth Capital, Manu Kumar, founder and chief Firestarter at K9 Ventures, and George Ugras, head of technology company IBM’s investment subsidiary IBM Venture Capital, discussed the importance of micro VCs.

Connors noted that successful companies have traditionally always had one investor that stuck with them from the early stage through to the exit, which used to be firms such as Sequoia Capital, but increasingly CVCs also get in at the series A stage. The panel pointed out that a corporate’s strategy aligns well with that of a micro VC, as there is less emphasis on turning a startup into a unicorn to get a large financial return and more of an emphasis on helping the startup scale efficiently.

Ira Ehrenpreis, managing partner at DBL Partners, and Paul Wimer, senior principal at Clareo Partners, followed that discussion with insights into impact investing. Ehrenpreis, a director of electric car manufacturer Tesla, spoke at length about the influence of that company, which has reopened a car factory in the South Bay Area that created several thousands of jobs.

He also returned to the topic of diversity, noting that out of DBL’s latest fund, seven out of the first 10 investments were in startups led by women – receiving applause from the audience.

The idea of impact investments, Ehrenpreis noted, may sound odd when considering that his firm is competing with traditional VCs, but sometimes – and especially when it comes to startups led by millennials – it is the very factor that wins them a deal.

The first day moved towards its close with Jody Thelander, founder of Thelander Consulting, speaking to Christine Leong Connors, managing director at JP Morgan Private Bank, about her 2016 CVC compensation report, which has been detailed here.

Finally, a series of GCV’s signature Unpanels brought the day’s proceedings to an end before a gala dinner during which Claudia Fan Munce, former head of IBM Venture Capital, was awarded a lifetime achievement award (see here). Munce thanked the other delegates, noting that during her long career, she always felt closer to her corporate venturing family than many of her IBM colleagues.

This “family” has been growing. Welcoming the more than 450 delegates in attendance, Tim Lafferty, chief operating officer, also took the opportunity to welcome the company’s newest member of staff, Janice Mawson (no relation to editor-in-chief James Mawson).

With more than 16 years of experience in the VC and startup communities, Janice Mawson will be working as consulting director for the GCV Leadership Society. She previously led the National Venture Capital Association’s Corporate Venture Group and other business development initiatives. 

She joins another recent hire, Nicole Idar, who will serve as Global Corporate Venturing’s features editor and will oversee our monthly magazine as well as special reports such as The World of Corporate Venturing.