Corporate Venture Creation With LG Nova's Shilpa Prasad

Fred Schonenberg
Hello, everyone, and welcome to the VentureFuel Visionaries. I am your host, Fred Schonenberg. I'm the founder of VentureFuel, and I am so excited today to welcome Shilpa Prasad. She is the Head of AI Incubation at LG Nova, which is the Silicon Valley-based innovation center of LG Electronics, which is focused on building transformative new businesses and accelerating emerging technologies. 

At LG Nova, she leads efforts to identify bold founders and breakthrough ideas that can grow into scalable ventures that are adjacent to LG's core business areas, which we'll talk a lot about later on in the show. But they have initiatives like LG Nova's Entrepreneur-in-Residence Program, and she helps bridge the gap between startup innovation and enterprise scale by giving entrepreneurs access to strategic resources, market opportunities, and, of course, the global scale and opportunities of working alongside one of the largest technology companies in the world. 

We're going to talk about the future of AI commercialization, what makes LG Nova's incubation model unique, and how corporations and startups can successfully collaborate, and what it really takes to build new ventures in a large organization. Shilpa, thank you so much for joining us. I’m very excited to have you on today.

Shilpa Prasad
Thank you for having me, Fred. Equally excited to be part of this conversation.

Fred Schonenberg
So for people who may not know LG Nova yet, can you give a little bit of an overview of what you all do and the problem you're trying to solve?

Shilpa Prasad
Yeah, absolutely. So LG Nova is LG Electronics' innovation arm based here in the San Francisco Bay Area, which we call the Silicon Valley. The entire sort of mandate of us coming into existence, which is sort of under the leadership of Dr. Sokwoo Rhee, who is leading this organization, was to help LG Electronics move away from being known as a consumer electronics manufacturer to being a solutions company. 

What that automatically means for us is that we build software solutions rather than hardware businesses within the LG Nova context. The entire model is set up in a way that we are a venture studio inside the large enterprise, inside the large corporation, but aligned very, very closely with three areas that our HQ based in Seoul has mandated. And back in the day, it was ABC when not everything was AI. So A was for AI, B for biotech, and C for cleantech. So when we organized ourselves as LG Nova here, that's how we started out too, until everything became AI and now we are an AI first venture studio. 

Fred Schonenberg
It is interesting how everything became A, right? ABC used to sound good, now it's AI. It's got to lead the conversation. I think one of the things that's really interesting is the structure and focus of how you all have organized this. It feels different than a traditional innovation lab or even a venture arm. Can you talk about how you think about AI incubation inside of a company that is as large in size and scope as LG and how your structure is a little different from some of the more conventional approaches?

Shilpa Prasad
For sure. So I think for starters, I'll touch upon a few different aspects of what AI first means to us, but I think for starters, it is the ventures we are incubating. And I think there, the lens we took very early on is pretty much similar to what the rest of the startup world is doing. Where can AI actually offer efficiency gains and what can we do better with the capability of this technology that was not possible before. So our mandate was definitely AI native from the start, a little bit different from how the healthcare or the clean energy teams were sort of following this mandate. 

The second thing I think is where the capability of the technology is in the hype cycle. So when something is already mature, and I'll talk about a year, year and a half ago, where large language models were becoming the norm rather than something that is growing and scaling. Our leadership and us took a call together saying, those are not areas that we want to play in purely because of how far behind we're going to be, but also how capital intensive some of these initiatives could be, right? So my job became that much harder to find the right spaces, white spaces, with the capability of the technology and bringing it together in the form of ventures that have the potential to grow and scale and become billion dollar businesses.

The third, I think, aspect here that I'll touch upon a little bit is to really, and this goes back to the EIR, the entrepreneur in residence, and how identifying founders that want to build AI-first companies, not from a product capability, but also how they want to run their own companies in the future perspective. And that shift also came about a couple of years ago. Like it was not a given it's not a given that everyone was thinking in the same way, but sort of feeding that DNA into the organization through external talent and some internal changes, I think brings about what we do and how we do it differently.

Fred Schonenberg
It's very interesting. I wonder, how do you decide which areas to pursue and which not to? And I think your LLM example is amazing. In retrospect, you could look and say, okay, that's going to be incredibly capital intensive. Boy, it's going to take a lot of resources just to keep up with where it's going. But what about the grayer areas where it's not quite so clear? 

Do you have certain things that you look at? Like, okay, we know this is an industry that could be a billion dollar business. It's in one of our three areas. How do you think about filtering AI as such a wide lens at this point?

Shilpa Prasad
Yeah, so again, I always like to distinguish between what my peers within the health and clean tech spaces are doing, because their jobs, I wouldn't say are easier than mine, but slightly different from being able to work within a landscape, right? You have a landscape for where health opportunities are emerging. You go after those areas. You try to build one, two, three different kinds of ventures in adjacent areas, test something out, see what's clicking, what's not, and maybe move forward with the ones that are working out well. 

My job is across sectors and focuses, so I have less guardrails in place, right? So coming back to the question of how do I actually identify those, one example was the capital-intensive ventures, but the other, I think, is staying away from anything hardware, right? So even in the businesses that we're building, the dependency on hardware is something that I'm constantly eliminating. We really are thinking AI-first, native AI ventures that can totally leverage the capability of what generative AI can do specifically. We're not thinking robotics. We're not thinking physical AI. We're not thinking drug discovery. Those are all out of the realm for us. 

But I think there's other ways to maybe shed some light on this question. One is from a maturity standpoint, when we started this effort a couple of years ago, like most people, we were playing in the application space, and that's where looking at applications that could be things that we could do uniquely and differently and leverage the LG Nova ecosystem in a way that's not available to the rest of the world and what advantages we can offer our own ventures and founders to be able to succeed, right? So that's one way to think about it, and we can talk a little bit more about what LG Nova offers in its ecosystem to these founders in a little bit. 

But I think the second way to really think about it now from an evolution standpoint is we tried a few ventures, and when I say a few, just to give perspective to everyone, we have about 12 to 16 ventures under incubation at various stages at any given point in time, and one or two of those ventures, after they go through a stage-gated process, get to funding with their first check and spin out. So I think where we are today and what's interesting to us today, no matter which industry I'm looking at, is how do we build the control plane layer? It's different from the application layer.

I think in the first year, we experimented a lot with the application layer, and now we're doing the control plane layer. It's still not as capital intensive as a technology like large language models would be, but it's also not playing on the realm of just being so high up in the stack that someone could disrupt us or that we don't have a solid moat around. So there's many different angles, and it's complex.

Fred Schonenberg
Yeah, 100%. I would love to jump to something you referenced, which is what you offer to entrepreneurs, founders, et cetera, through LG. Because one of the things, right before we started recording, we were talking about how a lot of programs like this start with internal business units that have a problem that they can't figure out how to solve, and they turn to the venture team and say, go build it, buy it, et cetera. How are you all different from that? And maybe what do you then offer to those founders?

Shilpa Prasad
So I think the build by partner still exists for us, right? It just exists in a very different capacity. So the first thing for us is when we started out with LG Nova, we spent a couple of years building a robust ecosystem. The ecosystem comprises other startups, venture capitalists, other accelerators, incubators that are all part of our ecosystem collectively, and all care about the startup landscape as much as we do, right? 

The startup ecosystem in particular has now grown to about 5,000 startups over the last four years. And I'd say from the get-go, the focus on outside innovation was very, very crucial and fundamental to the way the vision has been set. And what I mean by that is, I think from Dr. Sokwoo Rhee’s perspective, he was, I think the mandate was for us to be able to leverage the capability of a startup partner, either from a technology perspective or a distribution channel perspective, and engage in a model that is a win-win situation for both parties involved, and move our ventures into market much, much quicker than otherwise it would take us, right, take for us to do. So that's on the startup side.

And I know it's not, I think it's like, oftentimes when I say this out loud, Fred, I mean, I do realize how simplistic it sounds in theory, but it's actually very, very difficult to find that partnership and execute the partnership in the right fashion in order to move our own venture to scale as quickly as possible, right? So I think that's unique. 

Fred Schonenberg
I have to say, I found that the simpler the idea, the better, because the value here is in the execution versus coming up with something clever that is some sort of loophole. The truth is, it's about rolling up your sleeves, finding the right partners and getting it to market through execution.

Shilpa Prasad
Yeah. I think the second thing I'll say is the government partnerships. There is a very strong emphasis on government partnerships. And at the moment, I think we most recently announced a partnership with the Arizona state, but apart from Arizona, we have the state of Nevada and the state of West Virginia, who are all partners in the way that they facilitate an ecosystem and more specifically early customer access for the ventures that we're building, right? 

And I think that's very, very powerful because if we're restricting ourselves from a funding and ROI perspective on one hand, and how do we have our ventures compete against some of the startups in the real world, in the outside world, not inside the corporation, this is a big, big win for us. And oftentimes I think where a lot of value can be both built and leveraged from the EIR's perspective. So I'd say that's the second piece, which I always like to touch upon.

Fred Schonenberg
Yeah, it's super interesting. Well, maybe you could tell us a little bit more about the EIR, the Entrepreneurs-in-Residence Program, because it's certainly unique from other programs that I've heard about. And I know that you're actively looking right now for some of them. So could you maybe talk about what it is exactly and then maybe what you're looking for?

Shilpa Prasad
Yeah. So you know how they say for most startup CEOs, they're always fundraising. For me and my job, I'm always hiring for my next EIR, right? Because I don't know at what pace the current ones will go through the stage gates and get their check, which means I need to backfill the spot.

That said, the EIR program is again designed around the outside-in innovation approach and model, where instead of trying to build these from ideas or ventures like in-house, the vision was always to bring in the talent that has the experience, that has the know-how, that has the hustle and the right sort of values associated with a founder or leader, and bring that DNA into our environment to help build the businesses that we want to build. 

And I think for everyone that listens into this conversation, it's important to note that this appears like a traditional venture studio, but in reality, what these founders and residents are building are LG subsidiaries. They are going to be leading and building LG subsidiaries in the future, right? So the experience piece actually becomes very front and center, and I'm not saying that we are not looking for folks that want to become first-time founders, but I think the mindset of eventually you're going to be leading an LG subsidiary and the CEO profile needs to match that is part of the process for me when I'm looking for talent.

Fred Schonenberg
So, but help me understand for maybe people that are new to the venture studio model, what is the beginning of this? Is it that your team internally spots a white space, an area that you think is really interesting, an adjacency in the software world? You build out that thesis to a certain point and then go find a founder to basically take it through the stage gate process? Is that the sort of timeline of things?

Shilpa Prasad
I mean, that's one way to do it, and that's definitely one approach we've taken. But the other approach we've also taken is that we bring in the builders and we say, here's the guardrails within which you need to operate. Let's ideate together and build a thesis and then let's go test it out. So both are possible. It just has to fit the constructs of some of the things that we have designed as guardrails within which we want to operate.

Fred Schonenberg
And maybe this is a tweak on the question of what's the type of founder you're looking for? But one of the things I always think about is if it's the first part where it's an internal idea or area, there's a myth around founders, right? That it's like they have the light bulb that pops in their head for the idea and then they can't stop sleeping because they have to go, this is their baby. This seems to be a little bit different. It's like they're adopting a baby or they just know they want to be a parent. And so I'm curious how you find founders or people that fit the profile you're looking for when it's not necessarily their idea. 

Shilpa Prasad
So, well, maybe like, let me take a step back, right? Like it has to be their idea. Like I can offer them a thesis saying, here's a problem area that's looking very, very interesting. But what you want to solve within that problem area is still your baby. Like I'm not defining it. You are defining it. You are coming up with the hypothesis to validate the pivots that you want to make during the stage gate of the process. 

Like that is all driven by the entrepreneur in residence, not me. Of course, I work very closely with the EIRs along these phases, but the decision is theirs. And that's how we want it to be. And that's what makes the whole process, I think very fun and interesting as well, both ways. 

Fred Schonenberg
So for founders that are listening, that have an idea that aligns, can you talk a little bit about what it's like building inside of LG Nova and things that they can unlock, access, et cetera, that they would not have access to on their own? 

Shilpa Prasad
So we spoke a little bit about the startup ecosystem and the government partnerships. And I'd like to reference that again, because those are typically not available to startup founders in the capacity that it's available within the LG Nova ecosystem. The other thing I'll add on top of it is the funding, right? So we do have a captive fund that is put into place where LG Electronics is an LP. And that fund invests in the ventures that are coming out of the incubation studio at LG Nova. 

So I'd say there's, again, both an advantage and a disadvantage there. In the outside world, when you're fundraising, you can go to multiple investors and you can create a sense of FOMO. All of that is possible. You kind of lose out on that with a captive investor. At the same time, if you have a business that is presenting commercial traction, is AI first and sort of meets all the other criteria that we're sort of designing for, then you probably have a higher probability of getting a check, a first check and a second check than in the outside world. So I think that is more a question, I think, in consideration for the EIR and how they want to build. 

And we share this upfront during the interview process. Like one of the first conversations with me, you will hear this narrative. So as an EIR, you can decide whether this studio and this enterprise is the right place for you to build or not, correct? And I mean, again, you and I have probably heard this many times, not every investor is the right investor. I think the same goes for not every venture studio might be the right venture studio for what the EIR wants to do with their time and what they want to build.

Fred Schonenberg
I love it. I always think that being as direct as possible about the upsides and the downsides, and then letting both parties self-select is the quickest way to get alignment to the right folks. Well, let me get you out of here on this. We do a little bit, something called a rapid fire at the end, where I'll give you some questions and just give me your gut instinct, rapid fire answers. So what do you think is the biggest misconception about AI right now?

Shilpa Prasad
That people are going to have a lot of free time. I think people are going to get busier.

Fred Schonenberg
Yes, I can back that one up. What is an AI trend that you think people are still underestimating?

Shilpa Prasad
I think the way funding is going to be available. There's still a lot of capital in the market. There's still a lot of activity. I think that trend is going to be on some level of shaky ground is what I imagine in the next couple of years.

Fred Schonenberg
What is one founder trait that you value the most or look for first?

Shilpa Prasad
Humility.

Fred Schonenberg
Startup speed or corporate scale?

Shilpa Prasad
Startup speed, always.

Fred Schonenberg
I love it. What is the hardest part of driving innovation in and around a large organization?

Shilpa Prasad
I think bringing people along, especially when people are sitting in different time zones. Structures are different. KPIs don't align. I think that's the hardest part of corporate innovation.

Fred Schonenberg
Thank you so much for sharing all your insights and time. Where do you want our listeners to go to learn more about the work you're doing at LG Nova?

Shilpa Prasad
I think lgnova.com is a good place to find more information on us and also take a look at some of the ventures we've spun out. If you want to get in touch with me, hit me up on LinkedIn.

Fred Schonenberg
I love it. Thank you so much for all of your time today and everything you're doing to spark change.

Shilpa Prasad
Thanks, Fred. Thanks for having me.