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
4
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
5
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
• 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.
14
Corporate Indecision
It takes 7 Years for classical ROI success
Talent is the leading indicator
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.
21
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
22
Next Steps?
Next Steps