Corporate venture capital activities have traditionally been cyclical. For example, in 2004 Dell disposed of its invested portfolio and other large corporations did the same. But in recent years, the investment activity of these large companies has returned and not only in the realm of large technology corporations. For example, a few years ago print conglomerate RR Donnelley invested in Helium, a social publishing startup. The investment funds of large corporations do not want to be seen as any other investor, since their objectives are different. In fact, the same entrepreneurs know this and know that it is not the same, that it responds to very different strategies, approaching an investment society that contributes money to keep growing (and that expects an exit in the next years) than approaching a fund corporate, who will be less interested in profitability and exit and more in the technological capabilities of the startup.
These corporate funds have several objectives, but a fundamental one (which has now led to their massive approach to global startups) is their interest in identifying and following disruptive innovations. They invest and later if they consider it convenient, integrate the startups into the company. Many corporations have been first minority investors, following the startup from within, before buying it. This is the case, for example, of MedImmune in Cellective Therapeutics, to which it bought in 2005. Also the case of Intel with Indysis from Seville, participated by Catalan investors. Intel was first integrated in the startup as an investor but after a short time bought the company. Lisa Lambert, the head of Intel Capital, said that they intend to help cultivate new technologies and seed the new markets that will serve as the destination for Intel’s nuclear products. It’s not a matter of controlling the company. If they like it, they will buy it. The Intel fund has done many operations, in companies such as CNET, Broadcom, WebMD and Research in Motion.
When in 2008 the company of retail Best Buy created its investment fund said that it looked for “a mechanism of market to participate proactively in the generation of innovations and disruptions”. Best Buy wanted to be an active agent in introducing new disruptive innovations that forced consumers to move from their old DVDs and flat screens to new technologies. One of its investments was Avner, a chip maker that puts its products in microphones to eliminate interference. Shortly after, Best Buy already had micros with this technology incorporated.
Blackberry also acts. In 2008 it created a fund (Blackberry Partners Fund) of 150 million dollars, in conjunction with Thomson Reuters and RBC. Blackberry Partners Fund has invested in companies such as SocialDeck (a Canadian gaming company), Xobni (US developer of e-mail solutions) and buzzd (an entertainment listing service).
ABB Group has a corporate venture capital fund, ABB Technology Ventures. It is headquartered in Zurich and has offices in Silicon Valley and Washington. Created in 2010, it invested $150 million in 17 operations, in sectors such as cybersecurity, robotics, data center efficiency or renewable energy generation. It invests in companies that can take advantage of ABB’s capabilities.
There is an award recognizing best practices and initiatives in the field of corporate Venturing. This is the Global Corporate Venturing award, which is awarded under the Global Corporate Venturing Symposium. The existence of this symposium and of the prize is an indication of the maturity of this dynamics of relationship between large corporations and small technological companies. In 2014, ABB Technology Ventures won the investment award category of less than $50 million for its investment in TaKaDu, a provider of advanced monitoring solutions for water distribution networks. ABB Technology Ventures was not alone in that investment. The operation was led by 3M and included other investors already in TaKaDu: Emerald Technology Ventures, Gemini Israel Funds and Giza Venture Capital. At the same symposium, ABB’s investment work was also recognized for its operation at Persimmon Technologies, a Massachusetts startup created in 2011 that develops disruptive 3D deposition technology for engine component manufacturing. Intel Capital accompanied ABB in this investment.
Companies believe that entrepreneurs are the future. Bernie Gracy of Pitney Bowes says, “They are our future clients, but they are also teaching us innovative things.” This is happening everywhere. Not long ago in Connecticut, the Stamford Innovation Center invited 100 business representatives to a meeting to discuss how big corporations and startups could solve technological challenges together.
At the inauguration of the Next Big Thing conference, companies like Unilever, Starcom Mediavest and many others cried out for the innovation generated by the startups. Unilever is very clear that the startups help to get technology for the company and for this reason they sponsored the competition of startups of The Next Big Thing. Also for this reason Unilever evolved its research center that had had for 50 years in the scientific and technological park ColworthPark, in the United Kingdom. Unilever and Goodman, a building and construction management company, built The Exchange, which houses large and small businesses, research groups and startups. Unilever does not claim preferential rights or any other privileges. It simply wants to create an environment conducive to innovation. The regional development agency East of England Development Agency (EEDA) contributed part of the 14 million pounds that the building cost.
GlaxoSmithKline (GSK) also completed a similar project. Together with the British government, the Wellcome Trust and the East of England Development Agency created a science park in Stevenage that aims to be an international benchmark in biotech startups. The total cost exceeded 35 million pounds and GlaxoSmithKline supplied the land and buildings of a production plant which had closed and which it no longer needed. GSK seeks nothing more than to create an environment of opportunities and be able to follow them from the proximity.
Northrop Grumman Corporation and the bwtech@UMBC Cyber Incubator have the Cync Program acceleration program, a global student-oriented initiative that seeks technology startups, in areas such as cybersecurity, big data, mobility security, security in physical systems and infrastructures Critical Northrop Grumman paves the way for customers and bwtech@UMBC brings incubation experience. Bwtech@UMBC is a 71-acre science and technology park at the University of Maryland. It currently has more than 120 technology and life sciences companies in various stages of development.
Cisco has the Cisco Entrepreneurs in Residence (EIR) program. Announced in August 2013, it targets entrepreneurs working in security, internet of things, big data, or smart cities. Shortly thereafter, the first edition of the program was completed, with six startups from Silicon Valley. These 6 companies were supported by Cisco managers and their partners and external mentors. The program also offered them financial support, coworking spaces, basic software tools and possibilities for collaboration with Cisco technical departments. A few years ago, Cisco and Pioneers (a global community dedicated to science, technology and entrepreneurship) announced the first edition of the program in Europe, with between 5 and 10 additional startups.
But Cisco is also doing things in other parts of the world where innovation, technology and entrepreneurship have flourished in an accelerated way in the last few years. Cisco India started in 1995 with 10 engineers. By 2015, the company had 11,000 employees in that country, with 6,500 engineers and 900 registered patents. Under the India Innovation Theme scheme, Cisco India negotiated $40 million out of a total of $250 million from the corporate fund for startups in that country. With this, Cisco India has invested in companies like Mobstac of Bangalore, Covacsis of Mumbai and unpublished of Hyderabad.
Citrix Systems, Inc., which is listed on the NASDAQ and which in 2011 billed more than $2 trillion, is dedicated to networking and collaboration virtualization technologies in the cloud. Citrix has a corporate initiative to invest in startups, the Citrix Startup Accelerator, which operates around the world. The accelerator also provides startups with spaces and mentoring and tries to take advantage of Citrix’s global presence. The company believes that, given the large and rapid technological changes in cloud services and mobility, the best ideas will come from innovative startups, those that have creativity, speed and flexibility.