VOL. 128 | NO. 60 | Wednesday, March 27, 2013
Companies Need to Think Like Venture Capitalists
MICHAEL GRABER & JOCELYN ATKINSON
Last week we discussed the concept of the intrapreneur and our conviction that companies must add the pressures of failure and constrained resources to get ingenuity. Real entrepreneurs have vision, resilience and fortitude. Their natural drive, focus on survival and ability to pivot with the market is what generates market winners. It is the natural selection process at work. This is why VCs think the team is most critical, and companies looking to innovate should too.
This week, the focus is on the proliferation of corporate participation in venture capital, seeking growth and innovation outside of the company. According to a new Boston Consulting Group study, standalone corporate venture capital companies are maturing and gaining momentum, “venture investing appears well on its way to establishing a firm foothold in the corporate world as companies look to nascent companies not just to generate financial returns but also to complement their R&D efforts, penetrate fast-growing emerging markets, and gain early access to potentially disruptive technologies and business models.”
In the past five years, corporate VCs participated in 16 percent of all VC deals, investing about $2 billion per year, which amounts to 8 percent of VC dollars overall. The BCG study reveals that corporate VCs are also investing at an earlier stage. Corporate investment in Series A deals doubled from July 2010 through June 2012.
As well, companies from more diverse industries are entering the VC space including: Intel, Google, Microsoft, Disney, Eli Lilly, J&J, P&G, Unilever, BP, Chevron, UPS, Visa, Amazon.com, Dupont, Sony, Motorola, Samsung, Nike and Adidas. There is significant capital at play for these companies. For example, Intel Capital has invested more than $10 billion since 1991, with a current portfolio valued at over $2 billion.
We want to provoke companies to start thinking and acting like VCs in order to generate substantial growth. Changing the culture to embrace calculated risk and empowering the right people within the organization are the first steps. Then the company needs to adopt the Open Innovation concept- source growth opportunities internally through high stakes intraprenuership and strategic innovation but also invite and evaluate opportunities from outside the company. Be open to outsourcing, licensing and acquisition. Most importantly let everyone in the company know that internal and external growth opportunities will be evaluated side by side according to the same criteria.
Mid-South companies: don’t stagnate, think like a VC. Take some risk. Place some smart bets. Drive hard for results. Be ready to lose on some and win big on others. Ultimately, this is the best way to grow in today’s complex environment.
Jocelyn Atkinson and Michael Graber run the Southern Growth Studio, a strategic growth firm based in Memphis. Visit www.southerngrowthstudio.com to learn more.