On February 6, 2012 I will be giving a keynote speech at the IBF Corporate Venturing and Innovation partnering conference. I will discuss the best practices and pitfalls organizations can face in the Corporate Venturing arena. As readers of this blog, here is an advance look at my slides. Here is the link to the conference in case you want to sign up. It is going to be an amazing conference with lots of corporations there looking to build partnerships with startups and companies looking to grow their business.
Posts Tagged ‘corporate partnerships’
January 9, 2012 source: Xconomy
Corporate partnering is the keystone of Allegis Capital’s investment strategy. Given my 15 years as an investor, I recently put together these thoughts on partnering which were distributed by XCONOMY and Global corporate venturing publications.
Fifteen years ago, the expansion model of a startup was fairly linear: The first three years were dedicated to building the business domestically. Year four generally saw European expansion. And by year five, the company was starting to explore the Asian markets.
The emergence of the Web as a viable commerce vehicle, though, brought about a paradigm shift in the startup world that obliterated that model—and forced entrepreneurs to change their plans. Rather than ignoring the global marketplace, today’s smart startups need to think with an international perspective from Day One—and work quickly to expand their footprint.
Of course, becoming part of the global network during a company’s formative days (when budgets are tight and research and development is crucial) isn’t easy, even with the advances and inroads the Web has introduced. At Allegis Capital, where I am managing director, many of our portfolio companies have found that the surest path to becoming an international company is by partnering with large, multinational corporations.
It’s a strategy that might sound curious at first. Big business works at a different speed and with different priorities than the startup world. But the backing of a large corporation can not only supplement a startup’s bottom line; it can also open doors that might otherwise remain firmly shut.
Beyond that, this sort of strategic partnership can provide market analysis that is impossible for startups to gather on their own, acting—essentially—as the ultimate focus group…
What’s Left to Know? A report by Orange Silicon Valley, the Group’s development center in San Francisco, raises new questions about the direction of IT/Internet tech research in Silicon Valley
As more and more corporate giants move their research centers to the Silicon Valley, a new study from Orange raises questions about the current patterns of academic research in IT and the Internet. In-depth interviews with leading technology and academic researchers reveal changes in attitudes, methodology and motivations that are impacting the way information technology research has been quietly but massively transformed by the unpredictable and disruptive growth of the Internet
Interviews between veteran Silicon Valley reporter Lee Gomes, and researchers from Google, Facebook, Microsoft, UC Berkeley, Stanford and more, were conducted in the spring and summer of this year. The results are being made available to the public for free as part of open dialog about the evolution of the industry.
According to one of the themes of the report, the emergence of research centered on so-called Big Data – the digital exhaust of massive platforms like Facebook and Twitter – has given corporate players an edge over academic institutions lacking the data and the infrastructure to crunch these massive data sets. New technical challenges are revealing themselves continuously to internet firms as the scale, speed as well as nature of the gigantic and chaotic real-time data flows require new solutions and approaches that do not exist today. The growth in the Internet is amplified by mobile, social, and connected TV applications that, together with their worldwide reach, are dictating which tech advances matter.
Here is a selection of Bob Ackerman’s observations. To read everything, download the full Report.
Question from Lee Gomes: What do companies need to know if they want to invest in Silicon Valley?
Answer by Bob Ackerman: Venture capital is a club, a tight little club, organized around managing risk. As a VC, I want to invest with people I’ve invested with in the past, because I know how they’re going to be there when times are good and when times are tough. We syndicate. We share information. I’ve got everybody calibrated.
But a corporation is different. The corporation walks in and says, ‘Hi, I’m from a big global company. Perhaps you’ve heard of us. We operate in 110 companies around the world. We have 140,000 employees. We have a market cap of $42 billion. And we’re inviting ourselves to your party.”
The polite venture capital response to them is, “Fantastic, let’s find things we can collaborate on.” But what the venture capitalist is actually thinking is ‘Okay, what can I sell to this guy? How do I pull money out of his pockets and use it for whatever I need to get it into?”
Lee: So what should he say instead?
Ackerman: The more truthful kind of response would be, “Who cares that you’re a big global company, because you may be here today, but you’re going to be gone tomorrow. You’re reassuring me of your commitment, but you’re corporate direction is going to change. You’re not a long term player. And so you’re going to be a tool of convenience for me in my ecosystem.” …
The history of corporate venturing, with few exceptions, has born that out. They get in, and they get out. Every two years, you’ll have new people in place. You’ll have changes in strategic direction. Corporate priorities will ebb and flow. When the markets get competitive, the top corporate guys look at the venture program – which is usually generating losses – they say ‘Who got us into this? Fire him. Get us out of it.” They forget everything they learned. But five years later, they’ll decide to start all over again.
Lee: So why should companies bother with Silicon Valley in the first place?
Ackerman: When you’re seeing the future for the first time, there’s a leap of faith required. As venture capitalists in Silicon Valley, we’re in the business of inventing the future. Yet that’s very difficult to do, and that’s why venture capitalists sometimes have a herd mentality, like, “If one of those is good and successful, we need 400 of them.” But it’s the guy who does it the first time, who sees it for the first time, who has the conviction to pursue that vision and organize people around him – how rare that type of person really is.
Lee: The take-aways?
Ackerman:Companies who think they can use occasional venture investments to gain access to Silicon Valley research will be greeted with open arms. Then, the trouble will begin. They should keep an eye on their wallets.
Another session at Allegis Capital’s recent Limited Partners meeting focused on how venture-backed startup CEOs should view their board meetings. CEO consultant Darlene Mann offered some helpful tips to our portfolio entrepreneurs. Darlene is a startup CEO advisor, former CEO from startup Siperian, and a former general partner at Onset Ventures. I have known Darlene for years and her packed presentation reflected the interest in the topic. (more…)
With venture capital increasingly difficult to come by as the industry faces consolidation and its own fund raising challenges, entrepreneurs are looking to any and all potential sources of investment capital with which to build their businesses. Turning to “angel investors” for seed capital is just one example of this “any port in a storm” mentality. Corporate investors, once again focusing their attention to the start-up domain, represent another potential source of growth capital and perhaps more important, strategic partnerships.
The case for start-up/corporate collaboration is clearly compelling. Start-ups are renowned for their creativity and efficient innovation models, but are often challenged in bringing their products and services to markets where they have no established brand identity and little if any distribution or customer support infrastructure. Building these elements of business infrastructure are expensive, time consuming and fraught with significant levels of implementation risk. Corporate investors on the other hand have established distribution channels, recognized brands and trusted customer relationships. What they often lack is a culture of innovation that can keep pace with markets that are evolving at the speed of the Internet’s growth. By combining the strengths of the start-up and the corporate partner – the potential for synergies can be seductive. (more…)