Corporate venturing medellin carter williams final

Corporate Venturing

Teaching Elephants to Dance Not Afraid to Fail

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J. Carter Williams

Serial Entrepreneur

&

Managing Director

Open Innovation Ventures

&

Founder

MIT Corporate Venture Consortium

&

Founder

Boeing Ventures

Corporate Venturing

Email: [email protected]

Web: www.oiventures.com

Twitter: oiventures

Outline of a Discussion

Medellin, 09 March 2011

• Why Corporate Ventures

• How to do it: Case Study

• Key Lessons Learned

• Next Steps

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Today’s Discussion

• Entrepreneurs: 25% of US GDP growth, 12% of population

• S&P 500’s top quartile performers are only 10 years old

• Over 80% of new jobs are generated by small business

• 34M new jobs since 1980 while Fortune 500 lost 5M Jobs

• 71% of ideas are modified ideas encountered in employment

• 80% of start-up funding is from customers and savings

• 80% of Forbes 400 are first generation

• 20% of downsized managers over 40 start a business

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U.S. Innovation Data

Why Corporate Ventures

Integrating Two Worlds

What Corporations Do Well

• Deliver large scale systems without compromise

• Build enduring relationships with current customers

• Leverage processes to deliver value

• Manage Programs

What Entrepreneurs Do Well

• Make scale and legacy irrelevant

• Find whole new customers and build new relationships

• Leverage talent to deliver value

• Manage Opportunity

Corporations can achieve top decile S&P 500 performance by integrating

entrepreneurial DNA into Corporations world class systems, processes,

relationships and opportunities.

Why Corporate Ventures 6

Reasons to Venture….

• Make Money – Pension Fund

– No better place to put money

• Subsidize R&D – Spin Out and Re-acquire

– External capital is momentarily cheaper than internal

• Disruptive Technology – Prevent “Corporation”

from killing good ideas

• Talent – VC model attracts talent

– Compensate Innovative Employees

• Find Technology – Search the Earth

– Hedge

– Leverage company's distribution and marketing

• Set Standards – Get developers on board

– Intel A-64

7 Why Corporate Ventures

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A Case Study 2001

1 Million parts flying in formation

• Find and Implement Growth Opportunities

• Eliminate the Barriers to Opportunities

• Gain Recognition as an Innovative Company

• Capture and Grow Employee Enthusiasm

• Create Multiple Paths to Growth

Chairman’s Initiative

Chairman’s Innovation Initiative Provides Every Employee the

Opportunity to Identify Growth Opportunities

9 How to: Case Example

Disciplined Investment

Innovator Decides & Acts

Phase 1 Phase 2 Gate

1 Review

Gate 2

Review Phase 3

Gate 3

Review

Gate Reviews

2 page white paper (WP)

Refine WP

5 4 6

$30-$60K

$50-$100K

Prototype and

market validation

Product and

market dev.

Market expansion

Innovation Resource Center resources assigned

Develop Business Plan

Improve Business Plan

BP BP

Board of Advisors (BOA) Oversight

Needs more work

BV Mentor assigned: Coaches innovator, helps with WP and process

Value Realization Value Creation (Chairman’s Innovation Initiative)

WP

BV Partner/ Advisor assigned: Assists and coaches in planning phases

Idea

$0.5- $1.0M

$5 - $10M

BV Partner: Advisor Portfolio Manager

Implement Business Plan

Boeing Ventures Investment Commitment

Re-work and re-submit

How to: Case Example 10

• Entrepreneur – Someone with a new business idea who wants to build a

business

• Prospective Team Members – Self Nominating list of people interested in joining new

ventures

• Mentors – Business Generalist who coaches teams, through all

phases, on marketing, engineering, finance, etc.

• Specialists – Tech Fellows, Venture Capitalists and other non-technical

skills that are available on an ad-hoc basis to help answer specific questions

Internal Ecosystem

11 How to: Case Example

Spin-Outs 3

7 in Phase 4

784

Submittals

7 in Phase 3

30 in Phase 2

60 Active Projects

190 Concepts Mentored

12 How to: Case Example

Barriers to Corporate Innovation

“Can We Innovate”

vs.

“Can we remove the barriers to Innovation”

Risk Tolerance New businesses share the

companies balance sheet, but have different investment

patterns

Oversight The governance for core vs.

growth businesses differs greatly

Talent Employees from the core

business rarely have skills to lead new business

Procedures Indemnification, benefits, compensation, annualized

systems, etc

13 Key Lessons Learned

• 99.7 % of corporate venturing groups cease operations within 3 years, regardless of performance.

• Many firms will re-start corporate venturing activities every 5-10 years.

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Corporate Indecision

It takes 7 Years for classical ROI success

Talent is the leading indicator

Key Lessons Learned

Real Growth Takes Time

15 Key Lessons Learned

Premise1: A firms most enduring asset is its customers

Corollary 1: The importance of marketing and distribution exceed that of R&D

Premise 2: Corporate Venturing is about renewing a corporation’s innovative aptitude, its aptitude of understanding customer value.

16 Key Lessons Learned

Innovation is harder than Invention

• Immerse…. ……employees in entrepreneurial endeavors

……decisions makers in entrepreneurial leadership

……technologists in entrepreneurial innovation

• Expose barriers to entrepreneurial models …….legal, risk, HR, finance etc.

• Shift from “Omnipotent” to “Market Validation” based decision making

• Tap into the unutilized talent of employees (under-employed)

Create the Culture

Next Steps 17

The Ecosystem and The Goal

Corp. Partner

IPO

Other Trade Sale

Education

Tech Transfer Forum

Mentor Network

BioGenerator

Nidus

Center for Emerging Technology

Source Qualify Mentor/Angel VC

University IP

Company IP

Entrepreneurs

Plant & Life Sciences

Advanced Manufacturing

Information Technology

Referrals incubators, corporate,

Venture Capital

Investment Conferences

Advocate

Wash U Idea Bounce

Hatchery

University Enterprise Forum

Bio Tech Committees

Real Time Embedded Systems Groups

Bio Informatics Communities

Incubators

Local

Midwest

National

Steady State GOAL: 3 to 5 $50 million companies/year

20 Funded

100 Qualify

50 Mentored

200-300 Technologies

External Sourcing (Non St. Louis)

County Incubators

Layoffs

Exit

Arch Angels

3-5 Exits

Next Steps 18

• Pursue Company and Regional Alumni – Smart people who left region: 30-50 years old – Value Prop: Life in Medellin is easier and affordable – Make a difference for your community

• Corporate Network – Pickup talent local corporations identify but don’t use – Link to Layoffs/Early Retirement/Down Sizing

• Database for Talent: LinkedIn, Etc • Recruiters – Search firms / In country reps / Speeches • Venture funding with feet in talent pools (Boston, India) • Angels – Match fallen angles (“Talent”) with money • Leverage Parents and Grandma

Talent is Vital

Next Steps 19

• Technology Risk: High, Medium or Low? – BioMed, Energy, Agriculture, Steel, Textiles, etc – Natural advantage?

• Market Risk: High, Medium or Low? – Inventory our relationships with potential corporate acquires

against the region’s technology base and large companies. – Relationships with bigger markets?

• Funding Risk: High, Medium or Low? – How much money do we need to succeed? – Money follows people – Can someone tap into regional wealth?

• People Risk: High, Medium or Low? – Entrepreneurs / Boards / Angels / Investors

Exercise #1: Venture Assets

Next Steps 20

• What is the history of company’s greatest success? – What is the product considered most responsible for

company success…… ….a product you had little to do with…. ….something that “made the company”

– Find the original employees and customers from that time, and ask them:

• How did the product come to be?

• Was it always deemed a success?

• Did you ever think it was going to fail?

• What made it a success in your company?

– Do the same study for a project that became a failure.

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Exercise #2: Innovation History

Next Steps

• Have a goal in mind (10M? 20M?)

• Would an Entrepreneur want to do business with your corporation

• Customers are the only validation of Innovation

• Bill Gates, Steve Jobs and Mark Zuckerburg have the same 24 hours in their day

• It will take 7 Years to see classical ROI results, so focus on Revenue growth

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Next Steps?

Next Steps