Corporate VCs discuss their value to corporations and start-ups
By Tom Ballard, Chief Alliance Officer, PYA
It seems like a week doesn’t pass without reading about a new corporation launching its own venture fund or expanding existing efforts. Just last week came an announcement from Nationwide Insurance that it would invest $100 million in such an initiative that it started a year ago.
Our perception that large corporations are jumping on the venture bandwagon as never before was validated on Friday during a luncheon forum hosted by the Technology Association of Georgia (TAG).
“Almost every corporation has a venture arm,” Tom Hawkins, Managing Partner of Forte Ventures, told the packed room. The Atlanta resident said that the number is now 960, almost triple the total that existed in 2011.
Hawkins joined four other fund managers on a panel discussing “The Strategic Value of Corporate Venture Capital.” Three of his fellow panelists represented large Atlanta area corporations – Aflac, Assurant, and UPS – while the fourth came from the Bay Area.
All sung the same song in terms of the rationale for starting their funds – strategic insights into the future direction of technology. As one panelist noted, “My fund is a footnote on the corporate balance sheet,” meaning the amount invested in the venture fund is a very small percentage of the corporation’s annual expense.
Yet, all agreed that the value of corporate venture investments is both insights into technology and risk mitigation for the corporation.
“We invest in the things we don’t understand,” Rimas Kapeskas, Managing Director of the UPS Strategic Enterprise Fund, said. “It’s about continual learning. The real success is what you are going to learn from these (start-up) companies.”
Both Robert Lonergan, Executive Vice President and Chief Strategy Officer at Assurant, and Ray Schuder, Managing Director of Hewlett Packard Ventures, also echoed the importance of learning from start-up entrepreneurs.
“The closest you are going to get to where technology is going is through start-ups,” Schuder said with Lonergan quickly adding that, for a person charged with helping drive his corporation’s growth, the “competitive insights” that come from working with entrepreneurial enterprises is invaluable. Hawkins noted that “our investments are an extension of our corporate R & D.”
The panelists also engaged in a lively discussion around the manner in which strategic partnerships with start-ups are structured. For many entrepreneurs, there are a number of concerns – from their intellectual property being stolen to the rights of first refusal if the technology is perfected and board oversight or observation rights.
“It’s not the real fear that entrepreneurs feel,” Hawkins said about corporates coming in and stealing technology. Other panelists added that many of the conditions are negotiable.
In the end, Lonergan captured the discussion well by saying that “it’s a mindset; you want both sides to win.”
This was the third TAG event we’ve attended in the last few months, and we’ve found them very useful. In fact, a fellow member of the Launch Tennessee Board of Directors – Frank Williamson – also attended Friday lunch meeting. He launched Oaklyn Consulting about a year ago and was in Atlanta on business.
If you are planning a business trip to Atlanta, you might want to see what TAG is offering. Here’s a link to the organization’s events calendar.