15.369 corporate entrepreneurship: strategies for
TRANSCRIPT
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MIT OpenCourseWareht______________tp://ocw.mit.edu
15.369 Corporate Entrepreneurship: Strategies for Technology-Based New Business Development Fall 2007
For information about citing these materials or our Terms of Use, visit: ________________http://ocw.mit.edu/te___rms.
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Corporate Venture CapitalStudy Project
Dr. Andrew Wang, NIST/ATPDr. Val Livada, MIT Sloan
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Study TeamIan MacMillian Wharton School of Business
Edward Roberts Sloan School of Management
Val Livada Sloan School of Management
Andrew Wang National Institute of Standards and Technology
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Objectives
Create knowledge base of CVC best-practicesStrategy and structureManagement and processOutcomes and metrics
Assess funding landscape for early-stage technology
Assess interaction between large and small companies in the innovation ecosystem
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Primary source data
Qualitative interviews30 companies
Survey of CVCs48 CVC respondents
Case studyCVC and stakeholders
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Survey RespondentsAir ProductsApplied MaterialsAscension HealthAstraZenecaBASFBDBlueCrossChevronDisneyDowDuchossoisDuPontEastmanEasenergyGenzymeGlaxoSmithKlineHondaIBMIn-Q-TelKodakLillyMichelin
MicrosoftMitsubishi PharmaMotorolaNECNokiaNovartisPanasonicPhilipsSAPSiemensSilicon Valley BankSouthern California GasSunTakedaTELUSTexas InstrumentsTurner BroadcastingTycoUnileverUPSVisa
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Survey Data
1 1
2
1
4
5
3
8
6
8
1
2
3 3
02
46
8N
umbe
r
1980 1985 1990 1995 2000 2005Year
CVC Organizations - Year Established
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Survey Data
65%
35%
NoYes
Independent Subsidiary Company
63%
38%
Discretionary FundDedicated Fund
Type of Capitalization
CVC Organizational Form
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Survey Data
102
03
23
212
510
2
0 5 10Number of CVCs
CVC Reporting Relationship - 1
CEO
CFO
CTO
Corporate - Strategy/Development
Corporate - Finance
Corporate - R&D
Business Unit - Head
Business Unit - Strategy/Development
Business Unit - Finance
Business Unit - R&D
Other
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Survey Data
65%
15%
21%
CorporateBusiness UnitOther
Company Organization
8%
29%
23%
19%
21%
ExecutiveStrategy/DevelopmentFinance
R&DOther
Company Function
CVC Reporting Relationship - 2
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Survey Data
73%
27%
NoYes
Other CVC Units at Company
69%
31%
NoYes
CVC Engage in Internal Venturing
69%
31%
NoYes
CVC Invest in Spin-Outs
CVC and Corporate Venturing
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Survey Data
17%
83%
NoYes
Corporate
73%
27%
NoYes
Business Units
96%
4%
NoYes
External Investors
CVC Source of Capital
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Survey Data
15%
15%
50%
21%
StrategicFinancialStrategic w/FinancialFinancial w/Strategic
CVC Investment Philosophy
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Survey Data
8%
38%40%
15%Not important
Somewhat important
Very important
Extremely important
Seek new directions
6%
25%
17%
52%
Not important
Somewhat important
Very important
Extremely important
Support existing businesses
15%
31%54%
Not important
Somewhat important
Very important
Extremely important
Provide window on new technology
4%
38%
31%
27% Not important
Somewhat important
Very important
Extremely important
Provide window on new markets
10%
33%
31%
25% Not important
Somewhat important
Very important
Extremely important
Develop new products
65%
29%
6%Not important
Somewhat important
Very important
Extremely important
Improve manufacturing processes
CVC Strategic Aims
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Survey Data
10%
6%
4%
19%
21%
40%
$0
Less than $1M
$1M to $3M
$3M to $5M
$5M to $10M
$10M to $20M
Over $20M
Direct Investments
40%
2%8%
13%
17%
17%
4%
$0
Less than $1M
$1M to $3M
$3M to $5M
$5M to $10M
$10M to $20M
Over $20M
Limited Partner Investments
CVC Investments - Total Amount 2004-2006
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Survey Data
13%
10%
23%35%
15%4%
0
1 to 3
4 to 6
7 to 15
16 to 30
More than 30
CVC Direct Investments - Total Number 2004-2006
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Survey Data
29
8
4
1 1
010
2030
Num
ber
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0Share of Investments (2004-2006) - Concept Stage
CVC Organizations - Concept Stage Investments 2004-2006
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Survey Data
16
9
6
3
54
1
05
1015
Num
ber
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0Share of Investments (2004-2006) - Outside of USA
CVC Organizations - Non-U.S. Investments 2004-2006
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Survey Data
17
1
5
7
43
23
1
4
05
1015
2025
3035
Num
ber o
f CVC
s
0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1Share of Outside Hires
Hired from Outside Parent Company34
4
1
3 3
1 1
05
1015
2025
3035
Num
ber o
f CVC
s
0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1Share of Temporary Assignments
Temporary Assignment from Parent Company
Senior Personnel - Sourcing
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Survey Data
2%11%
34%53%
1 to 2 years
2 to 3 years
3 to 5 years
5 years or more
Senior Personnel - Expected Job Tenure
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Survey Data
2%
98%
No
Yes
Salary
15%
85%
No
Yes
Bonus
88%
13%
No
Yes
Bonus similar to Carried Interest
79%
21%
No
Yes
Carried Interest
Senior Personnel - Compensation
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Survey Data
20%
18%
31%
31%
Not important
Somewhat important
Very important
Extremely important
CVC Investment Sponsor - R&D or Business Unit
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Survey Data
52%39%
7%2%
Not important
Somewhat important
Very important
Extremely important
Angel Investors
20%
50%
26%4%
Not important
Somewhat important
Very important
Extremely important
Other CVCs
4%6%
38%51%
Not important
Somewhat important
Very important
Extremely important
Independent VCs
15%
28%
33%
24%
Not important
Somewhat important
Very important
Extremely important
Direct Company Solicitation
9%
30%
32%
30%
Not important
Somewhat important
Very important
Extremely important
Parent Company Business Units
Investment Sourcing
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Survey Data
2%11%
23%
64%
Not at all
Small extent
Moderate extent
Large extent
Due Diligence - Utilize Personnel from Parent Company
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Survey Data
45%
23%
25%
7%
NeverSometimesFrequentlyAlways
Voting Board Member
7%
18%
29%
47%
NeverSometimesFrequentlyAlways
Non-Voting Board Observer
CVC Representation on Portfolio Company Board
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Survey Data
17%
83%
No
Yes
Attendance at Board Meetings
29%
71%
No
Yes
Written Reports from Management
31%
69%
No
Yes
Phone Calls with Technical Management
19%
81%
No
Yes
Phone Calls with Business Management
35%
65%
No
Yes
Regular Site Visits
56%44% No
Yes
Feedback from Parent Company Groups
92%
8%No
Yes
Other
Communication with Portfolio Companies
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Survey Data
4%18%
56%
22%
Not at all
Small extent
Moderate extent
Large extent
Scientific Support
20%
38%
31%
11%
Not at all
Small extent
Moderate extent
Large extent
Engineering Support
14%
39%41%
7%
Not at all
Small extent
Moderate extent
Large extent
Management Support
11%
33%40%
16%
Not at all
Small extent
Moderate extent
Large extent
Marketing Support
39%
30%
27%3%
Not at all
Small extent
Moderate extent
Large extent
Other Commercialization Support
Provide Support to Portfolio Companies
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Survey Data
14%
45%
41%
Not at allSmall extentModerate extentLarge extent
Access to Customers
11%
27%
43%
18%
Not at allSmall extentModerate extentLarge extent
Access to Suppliers
7%
59%
34%
Not at allSmall extentModerate extentLarge extent
Access to Partners
Provide Access for Portfolio Companies
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Survey Data
13%
42%20%
18%
2%4%
0
1 to 3
4 to 6
7 to 15
16 to 30
More than 30
From CVC Direct Investments 2004-2006New Collaborations with Portfolio Companies
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Survey Data
26%
74%
No
Yes
R&D Collaboration
81%
19%
No
Yes
Manufacturing Collaboration
45%55%
No
Yes
Licensing Collaboration
45%55%
No
Yes
Sales Collaboration
73%
27%
No
Yes
Other Collaboration
Types of Collaboration with Portfolio Companies
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Survey Data
2% 15%
41%
41%Not at all
Small extent
Moderate extent
Large extent
Senior Management
4%
24%
47%
24%Not at all
Small extent
Moderate extent
Large extent
Technical Operations
2%
30%
46%
22%Not at all
Small extent
Moderate extent
Large extent
Business Operations
56%22%
11%11%
Not at all
Small extent
Moderate extent
Large extent
Other
Perceptions of CVC Value Contribution - Key Stakeholders
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Survey Data
24%
28%
35%
13%
Not at all
Small extent
Moderate extent
Large extent
CVC Activity Metrics
17%
15%
37%
30%
Not at all
Small extent
Moderate extent
Large extent
CVC Output Metrics
CVC Performance Metrics - 1
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Survey Data
9%
13%
31%
47%
Not at all
Small extent
Moderate extent
Large extent
Overall Financial Performanceof CVC Portfolio
9%
38%
33%
20%
Not at all
Small extent
Moderate extent
Large extent
Specific Company Performancein CVC Portfolio
7%
24%
22%
48%
Not at all
Small extent
Moderate extent
Large extent
CVC Value Contributionto Parent Company
CVC Performance Metrics - 2
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Survey Data
16%
14%
57%
5%9%
Increased significantlyIncreased moderatelyStayed about the sameDecreased moderatelyDecreased significantly
Past Funding 2004-2006
24%
43%
24%
9%
Increase significantlyIncrease moderatelyStay about the sameDecrease moderatelyDecrease significantly
Future Investment 2007-2009
CVC Trends