cb insights live: startups and accelerating corporate innovation

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November  10,  2015

STARTUPS  AND  ACCELERATING  CORPORATE  INNOVATION

asanwal@cbinsights.com

@cbinsights

ABOUT  CB  INSIGHTSA  unique  combination  of  data  science  and  machine  learning  to  help  you  see  what’s  next.

About  CB  Insights

Backed  by  the  National  Science  Foundation,  CB  Insights  uses  data  science  and  machine  learning  to  help  our  customers  predict  what’s  next—their  next  customer,  their  next  investment,  the  next  market  they  should  attack,  the  next  move  of  their  competitor  or  the  next  company  they  should  acquire.

The  world’s  leading  global  corporations  including  the  likes  of  Cisco,  Salesforce,  Castrol  and  Gartner  as  well  as  top  tier  VCs  including,  NEA,  Upfront  Ventures,  RRE,  and  FirstMark  Capital  rely  on  CB  Insights  to  make  decisions  based  on  data,  not  decibels.  

To  make  your  life  easier,  visit  http://www.cbinsights.com

”A detailed discussion of data collection and how the company parses them is written by CB Insights’ data scientists; it convincingly tells the story of scalability and accuracy for what they call “The Cruncher.”

From “Predictive Analytics And Novel Visualization Draw Customers To 'Must Have' Data” published April 8, 2015

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A FEW OF OUR HAPPY CUSTOMERSThe most publicly reference-able customers of anyone in the industry

See what other customers have to say at http://www.cbinsights.com/customer-love

“Designed by a VC insider who truly knows the space and understands end-user needs.”

“We're using CB Insights at Salesforce Ventures to analyze industry trends that are relevant to our strategy. It's helped improve our efficiency.”

Matt GarrattSr. Director, Corporate DevelopmentSalesforce Ventures

“CB Insights provides our team with a holistic and thematic approach that really captures market activity….we've found CBI to have the best access for the most accurate market view.”

“We have been looking for a tool that could give us the ability to track, research and identify investment opportunities. CB Insights provides this simply and in a simple, easy to use interface. The depth of information that we get is exactly what we need. Great product.”

Jonathan TudorVentures DirectorCastrol innoVentures

“CB Insights perfectly illustrates what I expect today from such online services to stay tuned to our fast-changing Tech Landscape. Accurate and up-to-date data mash-ups, intuitive UIs, smart data visualization capabilities and direct API access… all packaged together with straightforward pricing.”

Simon MencarelliSenior Manager, Strategic PlanningDassault Systems

“CB Insights' intuitive user interface, analytical capabilities, and detailed investment information create a very powerful tool for our team's research needs.”

Nate D’AnnaCorporate DevelopmentCisco

Greg BaeInvestments & Biz DevComcast Ventures

Jack LeeneyPortfolio ManagerTelefonica Ventures

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WHO  THE  HECK  AM  I?

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Anand  SanwalCEO  &  Co-­Founder

@asanwal

asanwal@cbinsights.com

Prior  to  launching  CB  Insights  in  2010,  Anand  managed  the  $50  million  Chairman's  Innovation  Fund  at  American  Express  and  also  worked  in  their  corporate  venture  and  M&A  units.  Before  American  Express,  he  worked  overseas  in  India,  China  and  London  for  a  #  of  startup  companies.  He  is  the  author  of  a  book  "Optimizing  Resource  Allocation"   and  has  degrees  in  Chemical  Engineering  from  the  University   of  Pennsylvania   and  in  finance  and  accounting  from  the  Wharton  School  of  Business.

WHAT  WE’LL  COVER

1. The  faster  pace  of  disruption

2. Innovation  theater

3. Possibilities  not  problems  – The  “Yes,and…”  approach

4. Unbundle  thyself

5. Build,  Buy  or  Partner?

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•

31.77 1 Vo

$2.96bn

THE  FASTER  PACE  OF  DISRUPTIONWhat  got  you  here  won’t  get  you  there

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TODAY’S  EMERGING  BUSINESS  MODELS  &  STARTUPS  BECOME  TOMORROW’S  PROBLEMS

11@cbinsightsSource: Clay Christensen Disruptive Innovation Framework

IT’S  HARDER  THAN  EVER  TO  STAY  ON  TOP…

13@cbinsights

The  lifespan  of  an  S&P  500  company  is  shorter  and  shorter.

…AND  THE  THREATS  ARE  MULTIPLYING

Cost  to  Launch  a  Tech  Startup

14@cbinsightsSource:  Upfront  Ventures

TECHNOLOGY  ADOPTION  IS  QUICKER  THAN  EVER

The  penetration  of  technology  happens  quicker  than  ever  before.  Time  is  not  on  your  side.

16@cbinsights

HOW  QUICKLY  DOES  ADOPTION  HAPPEN?

17@cbinsightsSource:  Wealthfront,  New  York  Post

WHATSAPP  USER  GROWTH?

17@cbinsightsSource:  Facebook

UNBUNDLING  WELLS  FARGO

All  the  startups  attacking  Wells  Fargo  (or  Citi  or  Bank  of  America)  product  &  service  lines.

21@cbinsightsSource:  https://www.cbinsights.com/blog/disrupting-­‐banking-­‐fintech-­‐startups/

WORRY  LESS  ABOUT  THESE  COMPETITORS

Disruptive,  discontinuous  innovation  rarely  comes  from  your  giant  competitive  peers.  

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AND  WORRY  MORE  ABOUT  DEATH  BY  A  THOUSAND  CUTS

There  is  an  army  of  emerging  players  that  are  attacking  legacy  players  at  an  individual  product  &  service  level.  

20@cbinsights

1 Tech

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SO  WHAT’S  A  CORPORATION  NOT TO  DOThe  perils  of  innovation  theater

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INNOVATION  THEATER

20@cbinsights

HIRE  A  CHEF

20@cbinsights

BRING  ON  AN  INNOVATION  SHERPA  OR  DIGITAL  PROPHET

20@cbinsights

HAVE  A  STARTUP’Y  OFFICE

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open  office xBox

VISIT  SILICON  VALLEY  – “EMBRACE  INNOVATION”

20@cbinsights

LAUNCH  AN  ACCELERATOR  – GET  ARTICLE  IN  TECHCRUNCH

20@cbinsights

HIRE  A  CHEF

20@cbinsights

CASUAL  DRESS  CODE

20@cbinsights

HIRE  SOMEONE  WHO  PLATEAUED  AT  GOOGLE  OR  APPLE  

20@cbinsights

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POSSIBILITIES  NOT  PROBLEMSThe  “Yes,  and…”  approach

THE  HEAD-­IN-­SAND  DISMISSIVE   APPROACH  TO  DEALING  WITH  INNOVATION,  STARTUPS  &  THREATS

10@cbinsights

Brian Moynihan, CEO of America’s second-largest bank by assets, said most of the robo-advisers are going after investors who aren’t rich enough for the bank to worry about.

They are below the bank’s wealth “cut off,” Moynihan said on the bank’s quarterly earnings call, “for lack of a better term.”

Source: Q1 2015 Bank of America earnings call recap by Quartz

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..

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THE  END  STATE  FOR  MOST  STARTUPS  IS  FAILURE

10@cbinsights source:  https://www.cbinsights.com/blog/venture-­‐capital-­‐funnel/

THOSE  GUYS  ARE  NOT  THE  PROBLEM

10@cbinsights

THE  ONES  THAT  SURVIVE  BECOME  THE  PROBLEM

10@cbinsights

BUT  MOST  INCUMBENTS  FOCUS  ON  WHY  THEY’RE  BETTER  AND/OR  WHY  THE  STARTUPS  WILL  FAIL

10@cbinsights

“Our  brand  is  trusted…”

“Supply  chain  is  complex…”

“This  is  a  highly  regulated  industry….”

“We’ve  been  doing  this  for  140  years….”

“Clients  trust  us.  They  won’t  trust  some  startup….”

“We  have  a  cost  advantage….”

“Our  risk  management  capabilities  are  proven….”

STOP  THIS!  IT  IS  INTELLECTUALLY  LAZY  

10@cbinsights Cl

HOMEWORK  #1  – FOCUS  ON  POSSIBILITIES   NOT  PROBLEMS

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1. Identify  a  startup  or  emerging  industrythat  you’ve  previously  “pooped  on”

2.Write  down  3  to  5  reasons  you  think  itmight  work  and  become  successful

3. Email  me  your  answers  –asanwal@cbinsights.com

HOMEWORK  #1  – WHY?

10@cbinsights

• Forcing  a  cultural  mindset  shift  morethan  anything

• Optimism  leads  to  innovation.  “Yes,and…”  is  inherently  optimistic

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UNBUNDLE  THYSELFWho  might  eat  our  lunch

UNBUNDLING  FEDEX

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/startups-­‐disrupting-­‐fedex-­‐ups/

UNBUNDLING  APPLE   iOS

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/unbundling-­‐apple-­‐ios/

UNBUNDLING  STARWOOD  (THE  HOTEL)

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/disrupting-­‐european-­‐banking-­‐fintech-­‐startups/

DISRUPTING  WALKING

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/disrupting-­‐walking-­‐transportation-­‐startups/

Tech

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$13.5bn

208 $2,.96b

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UNBUNDLING  THE  AUTOMOBILE

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/startups-­‐drive-­‐auto-­‐industry-­‐disruption/

UNBUNDLING  PAYCHEX

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/disrupting-­‐walking-­‐transportation-­‐startups/

UNBUNDLING  HSBC

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/disrupting-­‐european-­‐banking-­‐fintech-­‐startups/

UNBUNDLING  HONEYWELL

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/disrupting-­‐honeywell-­‐startups/

UNBUNDLING  P&G

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/disrupting-­‐procter-­‐gamble-­‐cpg-­‐startups/

UNBUNDLING  CRAIGSLIST

.

22@cbinsightsSource:  https://www.cbinsights.com/blog/craigslist-­‐unbundling/

HOMEWORK  #2  – WHO  ARE  THE  ATTACKERS?The  players  that  might  inflict  upon  us  death  by  a  thousand  cuts

10@cbinsights

• List  your  business’  products  &  services(or  use  your  website  if  possible)

• Identify  all  the  startups  who  areattacking  each  product  &  service(include  the  ones  you  think  are  stupid.  Remember  “Yes,  and…”)

• Study  those  gaining  traction,  look  forthemes  among  business  models,  etc

HOMEWORK  #2  – WHY?

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• Help  you  understand  the  landscape  inone  fell  swoop  (not  a  one-­time  effort)

• Catalyzes  action.  Visceral  view  intothreats  works  to  get  leadershipmotivated

HOMEWORK  #2  -­ AUTOMATING  THE  IDENTIFICATION  OF  STARTUPS  WITH  MOMENTUM  (THE  ONES  TO  WATCH)

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Get  in  front  of  the  best  startups  early

Understand  signals  of  growth

• Hiring  activity• Web  traffic• Media  chatter• Social  media  volume• Sentiment• Industry  health• Investor  quality• Tech/software  stack

Stalk  the  smart  money Identify  performance  metrics  momentum

BUILD,  BUY  OR  PARTNERHow  are  corporations  doing  it  today?

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BUILDIncremental  or  disruptive?

CORPORATIONS  ARE  GOOD  AT  FLAVOR  INNOVATION

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COPY  EMERGING  STRATEGIES  WHICH  HAVE  TRACTION

7@cbinsights

THE  DISRUPTIVE  MOONSHOTS  ARE  OFTEN  HARDER

7@cbinsights

PARTNERReally  access  innovation  or  good  PR

HAVE  SKIN  IN  THE  GAME  OR  DON’T  WASTE  STARTUP  TIME

“Joint valuecreation”

@CBINSIGHTS#DATADRIVENNYC 5

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PARTNER  IN  EXCHANGE  FOR  EQUITY  – MISALIGNED  INCENTIVES?

• $25  million  investment• Howard  Schultz  joined  board

• $56  million  loss  to  Square  (discounted  cardfees)

NORDSTROM  DOES  IT  WELL

Source: https://www.cbinsights.com/blog/nordstrom-e-commerce-case-study/

WALK  BEFORE  YOU  RUN  

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BUYA  nibble  or  a  full  bite?

CORPORATE  VC  TODAY:  FROM  TECH  TO  HEALTHCARE  TO  FINANCE  TO  ENERGY  TO  MEDIA

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2015:  CORPORATE  VENTURE  CAPITAL  ON  TRACK  FOR  NEW  HIGHS

The  first  half  of  2015  saw  corporate  VCs  participate  in  357  deals  totaling  $7.85B.  At  the  current  run  rate,  corporate  VC  deal  activity  is  on  track  to  top  2014’s  high.  Funding  dollars  involving  corporate  VC  arms  has  topped  $3B  in  each  of  the  last  3  quarters.

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@cbinsights

CVC  DEAL  SIZES  ARE  NOW  DECIDEDLY  LARGER  THAN  VC  OVERALL

Average  deal  size  with  corporate  venture  participation  has  topped  $21M+  in  five  of  the  last  six  quarters.  In  contrast,  average  corporate  venture  deal  sizes  stood  ≤ $17M  in  2013.

11@cbinsights

CORPORATE  VCs  PARTICIPATE   IN  1  OF  EVERY  5  VC  DEALS  IN  2015

Corporate  venture  firms  participated  in  just  over  20%  of  the  1,768  venture-­backed  rounds  in  the  first  half  of  2015.  That’s  compared  to  CVCs  participating  in  15%  of  venture  deals  in  H1  2013.

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NUMBER  OF  ACTIVE  CORPORATE  VENTURE  FIRMS  IS  UP  82%  SINCE  Q1’12

106  different  corporate  VC  firms  completed  an  investment  in  Q1’15  – a  multi-­year  high.  That’s  a  82%  jump  from  the  same  quarter  three  years  ago.

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MORE  THAN  HALF  OF  ALL  US  UNICORNS  ARE  BACKED  BY  CORPORATE  VCs

It’s  not  just  VCs  who  are  hunting  unicorns.  Among  the  74  US  private  companies  valued  at  $1B  or  more,  51%  have  a  corporate  venture  unit  as  an  investor.

11@cbinsightsSource: https://www.cbinsights.com/blog/corporate-venture-unicorns/

CORPORATE  VCs  WITH  THE  MOST  UNICORNS

11@cbinsightsSource: https://www.cbinsights.com/blog/corporate-venture-unicorns/

INTEL  CAPITAL  TOPS  CORPORATE  VC  FIRMS  BY  EXITS

11@cbinsights*Exits  by  Comcast  Interactive  Capital  since  2011  were  counted  under  Comcast  Ventures

THE  UNICORNS  WITH  THE  MOST  STRATEGIC  ACQUIRERS

11@cbinsightsSource: https://www.cbinsights.com/blog/corporate-venture-unicorns/

KLEINER  PERKINS  IS  THE  MOST  FREQUENT  VENTURE  CAPITAL  CO-­INVESTOR  WITH  CVCs

Kleiner Perkins and NEA are the most frequent co-investors with CVCs since 2010 followed by Andreessen Horowitz.

11@cbinsightsSource: https://www.cbinsights.com/blog/top-venture-capital-corporate-syndicate/

THE  MOST  ACTIVE  CORPORATE  VENTURE  CAPITAL  GROUPS

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CVC Investor Recent New Investments

THE  MOST  ACTIVE  CORPORATE  VENTURE  CAPITAL  GROUPS

11@cbinsights

CVC Investor Recent New Investments

DIGITAL  HEALTH  /  HEALTH  IT  DEALS  BY  CVCs  CLIMBING

Corporate  venture  deals  into  the  growing  digital  health  and  health  IT  arena  rose  44%  between  2011  and  2014.

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NOTABLE  CVC  INVESTORS

Select investments

Select investments

Select investments

FIN  TECH  DEALS  BY  CVCs  JUMP

Corporate venture deals into financial tech or ‘fin tech’ ticked up 75% between 2011 and 2014.

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NOTABLE  CVC  INVESTORS

Select investments

Select investments

Select investments

CYBERSECURITY  CVC  DEALS  HIT  HIGH  IN  2014

As reported threats continue to rise, corporate venture deals into cybersecurity rose 25% on a YoY basis in 2014 and hit a quarterly high in Q3’14.

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NOTABLE  CVC  INVESTORS

Select investments

Select investments

COMPARING  SELECT  CORPORATE  VCs:  TECH

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CVC Investor Number of New Deals Per Year

Most Frequent Stage

Median Deal Size

50-60 $8M Seed

$13M10-20

Series B

Series B

Series A$15M20-30

30-40 $11M

$15M Series C10-20

COMPARING  SELECT  CORPORATE  VCs:  HEALTHCARE

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CVC Investor Number of New Deals Per Year

Most Frequent Stage

Median Deal Size

1-10 $17M Series A

$9M1-10

Series A

Series C

Series A$10M1-10

1-10 $14M

$24M Series B1-10

COMPARING  SELECT  CORPORATE  VCs:  MEDIA

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CVC Investor Number of New Deals Per Year

Most Frequent Stage

Median Deal Size

10-20 $10M Series A

$8M1-10

Series B

Series B

Seed$3M1-10

1-10 $15M

$6M Series C1-10

COMPARING  SELECT  CORPORATE  VCs:  FINANCIAL  SERVICES

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CVC Investor Number of New Deals Per Year

Most Frequent Stage

Median Deal Size

1-10 $19M Series C

$14M1-10

Series B

Series D

Series C$19M1-10

1-10 $28M

Technology  companies,  especially  VC-­backed  ones,  are  increasingly   (and  somewhat  artificially)  expensive

The  Dichotomy  – Exiting  for  $1B  way  harder  than  financing

There  are  deals  at  the  low  end  but  for  many  corporations  who  want  needle-­moving  M&A,  this  doesn’t  work

Top  Acquirers  of  2015

1 - 5 6 - 10 11 - 15

Microsoft Snapdeal Tripadvisor

Google IBM Motorsport.com

Accenture Zealot Networks FoodPanda

Yello Mobile Amazon Apple Inc.

j2 Global Twitter Rocket Internet

Top Tech Acquirers: Q1'15 - Q3'15

Web | www.cbinsights.com

Twitter | @cbinsights

Email | asanwal@cbinsights.com

Tel | 212.292.3148

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