Guest lecture corporate venture capital (herman kienhuis)
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Guest Lecture about Corporate Venture Capital by Herman Kienhuis for Corporate Venturing course, MSc Business Administration, Amsterdam Business School (University of Amsterdam - UvA)
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Guest lecture corporate venture capital (herman kienhuis)
- 1. Corporate Venture Capital Herman Kienhuis, May 3 2018, Amsterdam MSc Programme in Business Administration Corporate Venturing Business Lab
- 2. Agenda • Introduction • The venture capital industry • Corporate venture capital • CVC Case studies • Q&A
- 3. Introduction
- 4. Personal Introduction Managing Director• KPN Ventures Founder/partner• River Venture Partners Studied Chemical Engineering• and MBA 5 years Finance & Strategy• (McKinsey) 8 years in Digital Media• BusDev (Sanoma Digital) 6 years in• Venture Capital Married• , father of three teenagers Loves live music• , movies , vintage design and slow food Supporting sustainable development• , education , research journalism and diversity
- 5. About KPN Ventures Key objectives Investment scope Portfolio 1. Strategic return by creating partnerships to boost the development of innovative products & services 2. Financial return on exits • Early growth-stage companies (>€0.5m revenues), based in Europe • Active in: o Cyber Security o Digital Healthcare o Internet of Things o Smart Home o Cloud Computing o Data & Analytics o Mobile/OTT services o Networking technology • €0.5m - €2.5m initial investments, as lead investor or co-investor • Selective investments in complementary VC funds EXITED
- 6. The Venture Capital (VC) Industry
- 7. Origin of modern venture capital Andreesen -Horowitz Balderton (UK) Prime (NL) 1957/1958 1972/1973/1974 1982/19831964/1965 US Small Business Administration Act US National Venture Capital Association 1999/2000 Internet bubble 2006/2007 Rocket Internet (GE) Atomico (SE) First venture-backed startup: Fairchild semiconductor European Venture Capital Association Kleiner Perkins Sequoia Bessemer (VC) 1995/1996 Benchmark Index (CH/UK) Venrock Draper Johnson Sutter Hill Greylock 2009 Accel (US/UK) ParTech (FR)
- 8. Types of venture capital and other financingcapitalneed(€mln) 100 50 10 5 1 0.5 0.1 high risk low risk supplier credit bank loans stock exchange (public equity) private equity start development phase friends & family crowdfunding strategic (corporate) investors Pre-seed (preparation) Seed (mvp) Early-stage (start-up) Later-stage (consolidation) Growth-stage (scale-up) Maturity venture capital angel investors
- 9. How does venture capital work? 1. FUNDRAISING 2. SCOUTING, EVALUATION & INVESTMENT 3. MONITORING (PORTFOLIO MANAGEMENT) 4. EXIT PORTFOLIO COMPANIES (ENTREPRENEURS) 5. DISTRIBUTION GENERAL PARTNERS (VENTURE CAPITAL FUND MANAGERS) LIMITED PARTNERS (INVESTORS) Evaluate investment opportunities and invest tranches of capital in fundable start-up enterprises Generate liquidity through M&A or IPO Govern and steer portfolio of start- ups towards profitable growth Distribute proceeds back to limited and general partners Source capital from institutional investors, high net worth individuals or family offices, corporations, sovereign funds and public development banks Profit share (carried interest) Minimum return (hurdle rate)
- 10. 2. Scouting, evaluation & investment process 1st Meetin g Pitch session (s) Intern al sessio n Screening Review Assessment Decision making Nego- tiations Due Diligence 100 Scanned (teaser, summary) 40 Reviewed (business plan) 20 Examined (team, market, customer references, financials) 4 Offered (term sheet) 3 Diligenced Contracts 2 Closed 6 Proposed (investment proposal) Dealflow from network introductions, startup/pitch events, databases/research, matchmaking platforms, advisors, etc.
- 11. Fund size (invested capital) Exit proceeds 5. Exit: VC math Investment Target return: 3 x cash return (in 10 year ca. 20 IRR p.a.) • Avg. shareholding at exit: 15% • Total exits valuation: €1B • 20 investments • €2.5 per investment SCOUTING FOR FUND RETURNERS Required exits and success rate Foals (+€10M): 100• (500% ) Ponys• (+€100M): 10 (50% ) Unicorns (+€1B): 1• (5% ) €50M €150M
- 12. Development of VC financing in the US Source: Wikipedia, NVCA
- 13. Development of VC financing in Europe Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lening and capital grants
- 14. Venture capital funding per country
- 15. Dutch Venture Capital funds (source: Peak Capital)
- 16. Corporate Venture Capital (CVC)
- 17. Origin of corporate venture capital 90’s70’s60’s 80’s 00’s 10’s 1960 – 1977 First wave of Corporate Venture Capital: large and cash-rich conglomerates aiming to diversify and find new markets Examples: Dupont, 3M, Alcoa, Boeing, Dow, Ford, GE, General Dynamics, Mobil, Monsanto, Ralston Purina, Singer, WR Grace, GM, Exxon and Union Carbide 1978 - 1994 Second wave: Silicon Valley 1995 - 2001 Third wave: Dotcom craze 2002 - now Fourth wave: The Unicorn Era (“software is eating the world”) Examples: • Tech: Xerox Technology Ventures, Intel Capital, Motorola, Eastman Kodak, Analog Devices • Pharma: J&J, Smithkline • Other: Colgate, Raytheon, Lubrizol Examples: • Tech: IBM, Microsoft, Dell, Lucent, Samsung, SAP, Qualcomm, Softbank • Media: Hearst, Bertels- mann, News Corp., Reed Elsevier, WPP • Pharma: Novartis Examples: Tech• : Google,Cisco, Salesforce, Naspers, Alibaba Pharma• : Merck, Lilly, Roche, Pfizer Other• : 7-Eleven, Campbell Soups, General Mills NL• : Shell, Randstad, Eneco, KPN, ING, ABNAMRO
- 18. CVC and other corporate venturing Development stage Control yes limited no Early/growth-stage Later-stagePre-Seed/Seed Ideation challenges In-house Incubator Startup Studio Investor in financial VC Fund M&A Direct Scale-up Investments Corporate VC Fund Partner in ext. Scale-up program Investor in financial VC Fund Hackatons Corporate Accelerator for external startups Corporate VC Fund Direct Startup Investments Corporate VC Fund Business Development Joint Ventures Strategic partnerships Startup Challenges Partner in ext. Accelerator Investor in financial VC Fund
- 19. Development stage Control yes limited no Ideation challenges In-house Incubator Startup Studio Investor in financial VC Fund M&A Direct Scale-up Investments Corporate VC Fund Partner in ext. Scale-up program Investor in financial VC Fund Hackatons Corporate Accelerator for external startups Corporate VC Fund Direct Startup Investments Corporate VC Fund Early/growth-stage Later-stagePre-Seed/Seed Business Development Joint Ventures Strategic partnerships Startup Challenges Partner in ext. Accelerator Investor in financial VC Fund CVC and other corporate venturing ventures innovation fund ventures
- 20. Development of Corporate Venture Capital 2017: 270 corporate venture capital units, investing $31B in 1791 deals, Participating in 1/5th of all VC transactions Source: CBInsights CVC report 2017
- 21. Most active CVC’s globally Source: CBInsights CVC report 2017
- 22. Active European CVC investors Selected investments 2017-2018 Allegro.ai, Prophese, Modcam, Pyreos Aimotive, Graphcore, Heliatek, Robart Digital Reasoning, Adikteev, Saagie, CityMeo, Rise Up, HalioDx En Voiture Simone, AgroEnergy, Seaver, Smartviser, Diabeloop, Upmem Humanoo, Billie, theGuarantors, CarSpring, Movinga, Jodel, Meero Gousto, Blow, Helpling, Celtra, Discuss.io, Sun Basket Bring!, Matrixx, Actlight, Adello, Insightness, NetGuardians, Bexio HelloAsso, Selenium medical, Linxo, Max, Ilea, Fluo, Yomoni, Cozyenergy BettyBlocks, WeLab, Twisto, Fintonic, R3, CoBase Anagog, What3words, Blacklane, Truckpad, VIA, Turo Careship, Magic Leap, Zizoo, Clark, Blendle, Wayup, Qwant Source: Dealroom.co analysis (4/2018)
- 23. Corporate Venture Capital vs (Independent) VC IVC Key objective Investment horizon Governance Value add Fund management incentives • Financial return for limited partner investors through exits • 8-10 years (closed-end) • General partners (jointly) decide on fund investments, independent from LP investors • General partners’ experience and individual network • Profit share (carried interest) • Management fees CVC • Strategic value creation for corporate investor(s) • From medium-term to very long (open-ended) • Investment committee with corporate executives decide on investments • Fund management experience and network plus the corporate’s industry expertise, business network, channels to customers • Corporate salary & bonus structure
- 24. Objectives and motivations of CVCs And... Strengthen innovation• capabilities Gain insights in technology• & market developments Get early access to new• technology Reduce cost of• experimentation Decrease time to market• Team• -up with entrepreneurial talent12% 24% 26% 47% 76% 79%Strategically align with relevant and emerging companies Listed financial returns as a core objective Increases the ability to be a thought leader in the category Establish a relationship with potential acquisition targets Increases sales or profits of the incumbent companies Leverage portfolio companies to improve internal efficiencies Source: CVC Landscape survey, Q4 2015, kbs+ Ventures
- 25. Corporate Venture Capital Strategies “Strategic - Innovation” “Strategic - Growth” “Independent” “Blended objec:ve” “Mul:- corporate” Examples DSM, Shell, NS, Pharmaco’s Sanoma, RTL, LibertyGlobal Cisco, Sony Google Ventures, Deutsche Telekom, SAP, Intel KPN Ventures, Telefonica, Qualcomm, Amex Mainport, Aster, Iris, GMPVC Primary objective Strategic: R&D Strategic: M&A Financial Strategic + Financial Financial + Strategic Structure Of Balance / Fund Fund / Of Balance Fund Fund / Of Balance Fund with multiple corporate LPs Governance lead CIO/R&D CEO/ Strategy/ New business CFO/Fund investment committee Strategy/ Innovation/ New Business CFO/Strategy/ Fund investment committee Stage focus Seed/Early Growth/Late Early/Growth Seed/Growth Seed/Early Value add focus Expertise, Lab, Validation Customer base Network, infrastructure Expertise, network, assets, customer base Network Source: adapted from Corporate Innovators Huddle’s Corporate Venture Forum
- 26. CVC Case Studies
- 27. “Strategic - Innovation”: DSM Venturing (2001-current) Strategy Examples of successful investments What worked for DSM Size• : N.A. (not a separate fund) Stage• : seed, early stage Ticket size• : €0.5-5M Geo• : Europe, US, Israel Scope• : Chemicals, Materials, Biotech, Life Science, Health Care, Nutrition Objectives• : primary: create strategic options and value for DSM, secondary: financial return Approach• : Support with commercialization and distribution via IP licensing • Long standing initiative which build up solid track record • Access to R&D, new technologies and patents • Acquisition of strategic companies (e.g. Lipid Technologies) • Financial return through exits • Complementary fund-in-fund investments
- 28. “Strategic - growth”: SanomaVentures (2012-2015) Strategy Examples of successful investments What worked for Sanoma Size• : €15 mln Stage• : seed Ticket size• : €0.1-0.5M Geo• : NL + Finland Scope• : digital media, ecommerce, education Objectives• : insights, access to talent, reduce cost of experiments, growth via acquisitions Key value add• : Supporting startups with access to (consumer) media • Insights in new developments • Access to entrepreneurial talent: e.g. Wappzapp, Scoupy, Fosbury • Reduced cost of launches (e.g. Beautybox business, Video app business, Fashion deal business, BTLE beacon business) • Realized revenue growth through acquisition of successful venture (Scoupy)
- 29. “Independent”: Google Ventures (2009-current) Strategy Examples of successful investments What worked for Google • Size: $2.5b (nb: started in 2009 with $100m) • Stage: early to growth-stage • Ticket size: $ 5-25m • Geo: US • Scope: Internet, mobile/ communications, healthcare, security • Objectives: financial return • Key value add: providing support with Google expertise (engineering, design, recruiting, marketing) and infrastructure • GV quickly became one of the most active CVC investors in the US creating access to outside talent and ideas • Boosting use of Google’s infrastructure (e.g. Cloud, Advertising, Analytics) • Financial return through exits
- 30. “Blended objective”: KPN Ventures (2015-current) Strategy Examples of successful investments What works for KPN • Size: €70 mln • Stage: growth-stage • Ticket size: €0.5-2.5M • Geo: (North-West) Europe • Scope: IOT, smart home, cybersecurity, healthcare, cloud, data, mobile/TV • Objectives: insights, innovation partnerships, financial return from exits • Key value add: Supporting startups with access to expertise, network, customer channels and infrastructure • Build up innovation ecosystem together with KPN new business • Insights in new developments: 400+ startups scouted per year, 100+ introduced to business • Creating cooperations to launch new services, e.g. data simcards, nationwide LoRa network, threat intelligence, remote heart monitoring • Create financial return through exits, e.g. Jasper Wireless • Complementary fund-in-fund investments
- 31. “Multi-corporate”: Mainport Innovation (2009-current) Strategy Examples of successful investments What works for MIF’s corporate investors? VC fund invested by Schiphol, KLM, NS,• Port of Amsterdam,TU Delft and NBI Investors, the independent fund manager Size• : €26 mln (Fund I & II combined) Stage• : seed, early-stage Ticket size• : €0.2-2.5M Geo• : Netherlands, Europe Scope• : Logistics, Transport and Aviation Objectives• : financial return, insights in developments, access to new technology Key Value add• : supporting startups with access to LP’s, industry expertise and network • Professionally managed by independent manager with investment expertise • Insights in latest innovations, through 100s of business plans and active involvement of corporate execs in MIF • Active cooperation/ launching partner of MIF portfolio companies • Exits demonstrate success of innovations
- 32. Q&A
- 34. Investment Analyst Internship @ KPN Ventures • Business, Finance, Technology/Innovation Management majors • Proven affinity with (digital) technology and entrepreneurship • English language; Dutch fluency not required • 4-6 months placement • 50/50 Amsterdam/Rotterdam Contact us at kpnventures@kpn.com
- 35. Thanks