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Tuesday, June 28, 2022

Minimum Viable Advice: Working With Corporate Investors

Startup corporate collaboration is a risky ride but a very worthy one if you know what you are doing. It might come as a surprise, but even the world’s top companies like Facebook and Apple owe part of their present success to large corporates. Facebook might not have been where it is now if not for large multinationals who were bold enough to support the company in the early stage of development.

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Building relationships with a big corporate comes with its risks, but also – massive rewards. Besides, it is a massive trend as James Mawson of Mawsonia Global Corporate Venturing Analytics highlights: more corporations are becoming more engaged in startups than ever before. His research shows that in the past 5 years, the number of corporates investing in startups either directly or indirectly has doubled while the value of these deals grew by 6.7 times, which is about 110 billion dollars worth of deals.

In Finland too, we have seen a number of cases where such collaboration came out with great benefits for both parties.

Sampo Hietanen, founder and CEO of MaaS Global says “Cooperation with one of the best-known brands in the world is extremely positive news for us. Toyota’s global network, high-quality R&D and genuinely customer-oriented culture will give our company a strong lead as it grows towards being the largest player in its sector.”

In 2017 his company received EUR 14.2 million in funding, with Japanese multinational automotive manufacturer Toyota leading the round. Toyota reportedly invested EUR 10 million in the development of Whim, an app which allows users to plan journeys and purchase various mobility services through a single service.

Step 1: What Do You Need To Be Aware Of When Working With CVCs

Understand their needs. If a corporation has a Corporate Venture arm (CVC), there is a reason for it. Thinking about the reason makes you aware of how your relationship will pan out. Bear in mind, that corporations are not necessarily after unicorns, but they need innovators to stay ahead of game.   

Finding innovation for existing business: Great path for an exit for you, but the downside might be that the market growth will be limited as the CVC competitors might be not willing to work with you.

Ask them about how competitors would see your partnership, how much they want to be involved, do they want to buy companies out or to do acquihires? It might be that they are looking for innovation outside of their core business too, for instance in HR, operations, sales, etc.

Battling fear of extinction: They are afraid of being disrupted and are hedging their main business by investing in startups.

In his opinion regarding Toyota’s investment in MaaS Global, Wilhelm Lindholm from Innovestor Group stated

“They [corporates] fear a “Nokia (mobile phones) scenario”; being outcompeted by new business models and content, or, a “Foxconn scenario”; becoming a volume manufacturer with price as sole differentiator. OEMs are determined to avoid this. Hence, they are investing heavily in technologies, software, services and infrastructure – all key components of the emerging mobility ecosystem (in addition to their manufacturing capabilities and brands). Ultimately, OEMs want to stay/get ahead in the future value chain.”

In this case, you can treat them as a normal VC, but since they have a large existing network of customers and partners – you should ask how you can get access to some of it.

Diversification Into New Markets / Industries: Some CVC’s want to expand their core business and “not keep all their eggs in one basket”.

Those are great partners for your investment, as they are rather hands off and simply invest in your company with added benefits of having access to markets.

Besides the above – the most important thing is to ASK the CVC as to what their reasons for existence are, what their plans for exits are, and for collaboration.

Step 2: Choose The Right Ones.

Besides knowing what they want, you need to know what you want. If you are simply looking for cash, you are already doing it wrong. Think strategically. Do you need access to a certain geographical market? Perhaps access to a certain list of companies as your clients or perhaps a patent portfolio? Well, who has what you need? Do they have a CVC arm?

Corporates need innovators to stay ahead of the game, while startups and scaleups need corporates to get access to their resources and funding. If approached well, the relationships can lead to success for both parties.

Step 3: Reach Out.

Surprisingly, corporates can be easier to reach than VC’s, as they are mostly on Linkedin and often do not get as spammed as investors do. In addition to that – they have many more entry points compared to VC’s.

For instance, you can find the relevant person within the organization who may not be a part of the CVC arm but can do a warm introduction. Remember, that anything in business comes down to personal relationships. Most of the big corporates have their own CVC arms or startup programs, whose main function is to build bridges and translate the rules of the organization to startups and vice versa. Keep in mind, that the conditions for collaboration are not made the same – you need to study the terms carefully well in advance.

Corporate Venturing Works Just As Well In Finland

“Finland has great entrepreneurs, whose deeds rang through the entire world and brought international corporates in the country. Most of the deals between startups and corporates in Finland came from international corporations. However, it is interesting to see is that local corporates do catch up.” – James Mawson of Mawsonia Global Corporate Venturing Analytics.

To date, corporates have invested in 51 rounds raised by Finland-based companies. Most of the investments have been done in businesses from a range of sectors, with IT, media, health, industry, and energy topping the chart. Top investors in Finland include Hon Hai (invested $116M), Faurecia ($38M), Ascend Group ($20M) as well as Alibaba, Nokia, Sanoma Ventures, Intel and Toyota. When it comes to corporate investments, Nokia gains the palm and Fortum, Finnair, OP Group and Valmet follow. According to Mawsonia, the value of corporate investments in Finland reached $366M in 2018. Finnish CVCs invest in rounds from almost any stage. “By a number of deals, most CVC investments are done in the early stage companies, but C and D stage investments bring the biggest value,” says Mawson.  

Your Starting Point: Five Local CVC’s To Check Out

Wärtsilä Ventures by Wärtsilä. Wärtsilä is a global leader in smart technologies for marine and energy markets. Wärtsilä Venture arm focuses on businesses designing renewables, environmentally friendly solutions, automation and smart use of data. The company has its own Wärtsilä Venturing Model that offers different entry and exit points depending on the collaboration type.

Accenture Open Innovation. Accenture has a sheer history working with startups in the field of smart cities, blockchain, data and more. Accenture works with startups helping them to jointly develop new platforms and applications, advance core offerings, or expand into new markets. The company is open to startups from all kinds of industries.

NGP by Nokia. Nokia Venture arm, NGP capital offers support system of funding, world’s largest markets entry, technical expertise and access to Nokia’s global networks. NGP invests $8-12M in growth companies that have demonstrated product-market fit, sustain strong customer engagement and have a proven business model.

OP Lab Startup Program. One of the leading financial groups in the region, OP Group has its own startup partnership program. The program offers resources, materials, mentorship, business development support, and grants. Plus startups get to test their solutions on OP customers in Finland.

Elisa Startup program. Finnish telecommunications giant Elisa provides startups advanced mobile infrastructure with customers that use large volumes of mobile data. Startups will get to test their products and services on 2M+ Elisa customers. With names like Transfluent, Oura ring and more, the company has already launch a number of new services and innovations to global markets.

Besides those listed above, you may want to check Finnish corporates like Kone and Stora Enso, who are working with startups through  Combient Foundry and Fortum, who recently announced a 150M euros investment to a US fund Valo Ventures. Plus, foreign CVCs from corporates such as GE, Tencent, Huawei, 3M, Intel, HP, Boeing, Samsung, Nissan are also active in Finland. You can get in touch with them via Helsinki Business Hub or meet at events like Slush and Arctic15.

The article is done in collaboration with Helsinki Business Hub, who organised a Corporate Venturing Power Lunch at Slush 2018. Check out their services here or follow them on Twitter.


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Valerie Vlasenko
Valerie Vlasenkohttp://vspace.news/
Valerie Vlasenko is a space journalist tackling the dilemma of popularising space. Founder of VSpace Media and an Editor at ArcticStartup - Valerie has rich experience as an entrepreneur, a journalist and a space lawyer.

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