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15.369 Corporate Entrepreneurship: Strategies for Technology-Based New Business Development
Fall 2007
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Corporate Venture Capital
Study Project
Dr. Andrew Wang, NIST/ATP
Dr. Val Livada, MIT Sloan
Study Team
Ian 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
Objectives
‡
Create knowledge base of CVC best-practices
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„
Strategy and structure
Management and process
Outcomes and metrics
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Assess funding landscape for early-stage
technology
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Assess interaction between large and small
companies in the innovation ecosystem
Primary source data
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Qualitative interviews
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Survey of CVCs
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30 companies
48 CVC respondents
Case study
„
CVC and stakeholders
Survey Respondents
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Air Products
Applied Materials
Ascension Health
AstraZeneca
BASF
BD
BlueCross
Chevron
Disney
Dow
Duchossois
DuPont
Eastman
Easenergy
Genzyme
GlaxoSmithKline
Honda
IBM
In-Q-Tel
Kodak
Lilly
Michelin
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Microsoft
Mitsubishi Pharma
Motorola
NEC
Nokia
Novartis
Panasonic
Philips
SAP
Siemens
Silicon Valley Bank
Southern California Gas
Sun
Takeda
TELUS
Texas Instruments
Turner Broadcasting
Tyco
Unilever
UPS
Visa
Survey Data
CVC Organizations - Year Established
8
8
8
6
6
Number
4
5
4
3
3 3
2
2
2
1
1980
1985
1
1
0
1
1990
1995
Year
2000
2005
Survey Data
CVC Organizational Form
Independent Subsidiary Company
35%
Type of Capitalization
38%
63%
65%
No
Discretionary Fund
Yes
Dedicated Fund
Survey Data
CVC Reporting Relationship - 1
2
10
5
12
2
3
2
3
0
2
10
0
5
10
Number of CVCs
CEO
Business Unit - Head
CFO
Business Unit - Strategy/Development
CTO
Business Unit - Finance
Corporate - Strategy/Development
Business Unit - R&D
Corporate - Finance
Other
Corporate - R&D
Survey Data
CVC Reporting Relationship - 2
Company Organization
Company Function
8%
21%
21%
29%
15%
65%
19%
23%
Corporate
Executive
R&D
Business Unit
Strategy/Development
Other
Other
Finance
Survey Data
CVC and Corporate Venturing
Other CVC Units at Company
27%
CVC Engage in Internal Venturing
31%
CVC Invest in Spin-Outs
31%
69%
73%
69%
No
No
No
Yes
Yes
Yes
Survey Data
CVC Source of Capital
Corporate
Business Units
External Investors
4%
17%
27%
73%
83%
96%
No
No
No
Yes
Yes
Yes
Survey Data
CVC Investment Philosophy
15%
21%
15%
50%
Strategic
Financial
Strategic w/Financial
Financial w/Strategic
Survey Data
CVC Strategic Aims
Seek new directions
Support existing businesses
6%
15% 8%
Not important
Not important
25%
Somewhat important
38%
40%
Very important
52%
Very important
Extremely important
Provide window on new technology
15%
17%
31%
4%
Not important
Not important
27%
Develop new products
Somewhat important
Very important
Extremely important
31%
Improve manufacturing processes
6%
10%
Not important
Somewhat important
33%
31%
38%
Very important
Extremely important
25%
Extremely important
Provide window on new markets
Somewhat important
54%
Somewhat important
Very important
Extremely important
Not important
29%
Somewhat important
65%
Very important
Extremely important
Survey Data
CVC Investments - Total Amount 2004-2006
Direct Investments
Limited Partner Investments
10%
17%
6%
4%
40%
40%
17%
19%
13%
2%
21%
8%
$0
$0
Less than $1M
Less than $1M
$1M to $3M
$1M to $3M
$3M to $5M
$3M to $5M
$5M to $10M
$5M to $10M
$10M to $20M
$10M to $20M
Over $20M
Over $20M
4%
Survey Data
CVC Direct Investments - Total Number 2004-2006
4%
13%
15%
10%
23%
35%
0
1 to 3
4 to 6
7 to 15
16 to 30
More than 30
Survey Data
29
10
Number
20
30
CVC Organizations - Concept Stage Investments 2004-2006
8
4
1
0
1
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
Share of Investments (2004-2006) - Concept Stage
0.9
1.0
Survey Data
CVC Organizations - Non-U.S. Investments 2004-2006
10
9
6
5
5
4
3
1
0
Number
15
16
0.0
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9
Share of Investments (2004-2006) - Outside of USA
1.0
Survey Data
Senior Personnel - Sourcing
34
25
30
35
Temporary Assignment from Parent Company
Number of CVCs
15
20
20
10
10
15
17
7
4
4
3
2
3
3
1
1
3
1
1
0
1
4
5
5
5
0
Number of CVCs
25
30
35
Hired from Outside Parent Company
0 .1 .2 .3 .4 .5 .6 .7 .8 .9 1
Share of Outside Hires
0
.1 .2 .3 .4 .5 .6 .7 .8 .9
Share of Temporary Assignments
1
Survey Data
Senior Personnel - Expected Job Tenure
2%
11%
53%
34%
1 to 2 years
2 to 3 years
3 to 5 years
5 years or more
Survey Data
Senior Personnel - Compensation
Salary
Bonus
2%
15%
85%
98%
No
No
Yes
Yes
Bonus similar to Carried Interest
13%
Carried Interest
21%
88%
79%
No
No
Yes
Yes
Survey Data
CVC Investment Sponsor - R&D or Business Unit
20%
31%
18%
31%
Not important
Somewhat important
Very important
Extremely important
Survey Data
Investment Sourcing
Angel Investors
Other CVCs
7%
2%
Independent VCs
4%
6%
4% 20%
26%
51%
52%
39%
38%
50%
Not important
Not important
Not important
Somewhat important
Somewhat important
Somewhat important
Very important
Very important
Very important
Extremely important
Extremely important
Extremely important
Direct Company Solicitation
24%
15%
Parent Company Business Units
9%
30%
30%
28%
33%
32%
Not important
Not important
Somewhat important
Somewhat important
Very important
Very important
Extremely important
Extremely important
Survey Data
Due Diligence - Utilize Personnel from Parent Company
2%
11%
23%
64%
Not at all
Small extent
Moderate extent
Large extent
Survey Data
CVC Representation on Portfolio Company Board
Voting Board Member
Non-Voting Board Observer
7%
7%
18%
25%
45%
47%
29%
23%
Never
Never
Sometimes
Sometimes
Frequently
Frequently
Always
Always
Survey Data
Communication with Portfolio Companies
Attendance at Board Meetings
Written Reports from Management
17%
29%
No
Yes
83%
Phone Calls with Technical Management
31%
Yes
71%
Phone Calls with Business Management
19%
No
No
Yes
69%
No
Yes
81%
Regular Site Visits
35%
Feedback from Parent Company Groups
No
Yes
65%
Other
8%
No
Yes
92%
44%
No
56%
Yes
Survey Data
Provide Support to Portfolio Companies
Scientific Support
22%
4%
18%
Engineering Support
Management Support
7% 14%
11% 20%
31%
41%
38%
56%
39%
Not at all
Not at all
Not at all
Small extent
Small extent
Small extent
Moderate extent
Moderate extent
Moderate extent
Large extent
Large extent
Large extent
Marketing Support
Other Commercialization Support
3%
16% 11%
27%
39%
33%
40%
30%
Not at all
Not at all
Small extent
Small extent
Moderate extent
Moderate extent
Large extent
Large extent
Survey Data
Provide Access for Portfolio Companies
Access to Customers
14%
Access to Suppliers
18%
Access to Partners
7%
11%
34%
41%
27%
45%
59%
43%
Not at all
Not at all
Not at all
Small extent
Small extent
Small extent
Moderate extent
Moderate extent
Moderate extent
Large extent
Large extent
Large extent
Survey Data
New Collaborations with Portfolio Companies
From CVC Direct Investments 2004-2006
2%
4%
13%
18%
20%
42%
0
1 to 3
4 to 6
7 to 15
16 to 30
More than 30
Survey Data
Types of Collaboration with Portfolio Companies
R&D Collaboration
26%
Manufacturing Collaboration
Licensing Collaboration
19%
45%
55%
74%
81%
No
No
No
Yes
Yes
Yes
Sales Collaboration
Other Collaboration
27%
45%
55%
73%
No
No
Yes
Yes
Survey Data
Perceptions of CVC Value Contribution - Key Stakeholders
Senior Management
2%
Technical Operations
4%
15%
Not at all
41%
41%
24%
24%
Not at all
Small extent
Small extent
Moderate extent
Moderate extent
Large extent
Large extent
47%
Business Operations
22%
Other
2%
11%
30%
Not at all
11%
Not at all
Small extent
Small extent
56%
Moderate extent
Large extent
46%
22%
Moderate extent
Large extent
Survey Data
CVC Performance Metrics - 1
CVC Activity Metrics
CVC Output Metrics
13%
17%
24%
30%
15%
35%
28%
37%
Not at all
Not at all
Small extent
Small extent
Moderate extent
Moderate extent
Large extent
Large extent
Survey Data
CVC Performance Metrics - 2
Overall Financial Performance
of CVC Portfolio
9%
Specific Company Performance
in CVC Portfolio
20%
CVC Value Contribution
to Parent Company
7%
9%
13%
24%
47%
48%
38%
31%
33%
22%
Not at all
Not at all
Not at all
Small extent
Small extent
Small extent
Moderate extent
Moderate extent
Moderate extent
Large extent
Large extent
Large extent
Survey Data
CVC Trends
Past Funding 2004-2006
9%
5%
Future Investment 2007-2009
9%
16%
24%
14%
57%
24%
43%
Increased significantly
Increase significantly
Increased moderately
Increase moderately
Stayed about the same
Stay about the same
Decreased moderately
Decrease moderately
Decreased significantly
Decrease significantly