cb insights live: startups and accelerating corporate innovation
TRANSCRIPT
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November 10, 2015
STARTUPS AND ACCELERATING CORPORATE INNOVATION
@cbinsights
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WHO THE HECK AM I?
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Anand SanwalCEO & Co-Founder
@asanwal
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?
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.
19@cbinsights
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.
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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
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BRING ON AN INNOVATION SHERPA OR DIGITAL PROPHET
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HAVE A STARTUP’Y OFFICE
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open office xBox
VISIT SILICON VALLEY – “EMBRACE INNOVATION”
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LAUNCH AN ACCELERATOR – GET ARTICLE IN TECHCRUNCH
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HIRE A CHEF
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CASUAL DRESS CODE
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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
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
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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
10@cbinsights
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 –[email protected]
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/
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?
10@cbinsights
• 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
7@cbinsights
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
7@cbinsights
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.
11@cbinsights
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.
11@cbinsights
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
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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.
19@cbinsights
NOTABLE CVC INVESTORS
Select investments
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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.
19@cbinsights
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
19@cbinsights
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
19@cbinsights
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
19@cbinsights
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
