Inside Corporate Venture Capital — Maija Palmer

Fred Schonenberg
Hello everyone, and welcome to the VentureFuel Visionaries podcast. I'm your host, Fred Schonenberg. I'm so excited today to welcome Maija Palmer. Maija is the Editor-in-Chief of Global Corporate Venturing. She has over two decades of experience covering technology and innovation in places like the Financial Times and SIFTED, and she is one of the top leading voices in corporate venturing. 

We're going to talk a little bit about the evolution of CVC, Corporate Venture Capital, uncover some of the trends that are shaping that industry, and discuss how corporations can maximize strategic value from external innovation and investments. Maija’s going to share some practical advice with us that are thinking about maybe launching a CBC and reveal secrets behind the success of some of the more successful CVCs. So I'm so excited to welcome Maija to the show. Maija, it's so good to have you.

Maija Palmer
Thanks, Fred. I'm excited to be on. Thanks for inviting me.

Fred Schonenberg
Of course. Can you share a little bit about your background and what led you to joining Global Corporate Venturing?

Maija Palmer
Yeah, so it's been kind of an interesting journey. I'm a long-time career journalist, so I was at the FT for about two decades, and mostly writing about technology in that time. So I became very interested in, particularly in the emerging world of startups, and that was what led me to join SIFTED, because the FT really doesn't cover startups and an awful lot. They start to care about companies more when they've launched on the stock exchange somewhere. 

So SIFTED gave this outlet to kind of really start to cover that, and then while I was at SIFTED, I kind of got down a further rabbit hole, which was this world of corporate venture, which wasn't terribly well known, probably still isn't very well known. But it's a substantial part of the kind of funding that startups can tap into, and it works slightly differently to VC, and it also struck me that it's hugely important for big corporations to be doing this. But they all do it slightly differently, and there are no real rules, and so there was just a ton of stuff to write about. 

And then sort of in parallel to me, James Mawson had founded Global Corporate Venturing, and so we were kind of writing about the same things, and so then a little bit further down the line, you know, we decided to join forces, and I hopped over to write about corporate venturing specifically with GCV. So that was the journey.

Fred Schonenberg
It's so interesting. I think you described it so well, that it's, you know, it's immensely important for the corporations. It's sort of growing, and then it's a very interesting space for startups, and in some ways feels unknown still, which is surprising, and then everybody is doing it slightly differently, which is fascinating. We went to your conference recently, and it was really interesting.

You guys do an awesome job of sort of speed dating, and so I met with, you know, 20 plus different CVCs, and they all have very similar challenges, but also they're attacking them slightly differently, so it was a fascinating experience, and I'm sure you see that as you're writing, but can you tell us a little bit about global corporate venturing and what its mission is overall? 

Maija Palmer
Yeah, so global corporate venturing, again, founded by Jim Mawson in about 2010, and it was when, you know, corporate venturing was really starting to be more of a force. I mean, it's existed for, you know, big corporates have invested in startups in some form or another for at least 100 years, right? You go back to sort of DuPont and Ford Motor Company and that kind of thing, but there was this new growing wave of corporate investing that was starting around then, so Jim, being very prescient, kind of thought that, you know, this industry needed some kind of focal point, and that's, he wanted global corporate venturing to be that, so we do a number of things.

I mean, we organize conferences, which you've been to, and that's really an important part because it gives a lot of people in the industry who can be sometimes quite isolated in their roles within their company a place to meet, so a lot of people like to come to our events because it just gives them that sort of support network and that, you know, and they can do anything from, you know, deal flow sharing to just kind of talking about common pain points, right? So that's one part of it, but then obviously in between conferences, what do you do, right?

You still want to keep this community informed, you want to put together a body of literature around best practice and keep people up to date on news, so that's what we do on the editorial side. And that's what I lead up to and so we have a website, newsletter, podcast, you know, all of those things, but collectively we're just trying to put together some of the collective wisdom, I suppose, about the industry. And then we have a third prong, which is a sort of educational piece, so career development for people who are in corporate venturing, so it's anything from somebody who's just started, this is their, you know, first year ever working in corporate venturing, CVC, they don't really know the basics of investing, we have a course for them. 

But then we also do some courses for people who've been doing it a while but might be struggling with some of those areas, like achieving real sort of strategic alignment with the company, so there's, you know, and those have been, those courses have been created really because of the community need and they're often taught by people who are, you know, who've been long-term in CVC, so it's a real sort of by the community for the community effort. 

Fred Schonenberg
I love that, I kind of want to go down some of those paths, but one thing you mentioned in the intro that I thought was really interesting was that global corporate venturing, or just corporate venturing, corporate venture capital is different slightly from traditional VC, can you touch on that a little bit? 

Maija Palmer
Yeah, so I always like to say that actually, you know, CVC is the hardest job, like it's harder than doing VC, and VC people probably don't like to hear me saying that. And I don't mean any disrespect to them, you know, it's sort of, it's also a difficult job, but what I mean when I say it's harder is that sort of corporate VCs have this dual aspect to their role. So they have to be clever and astute and on trend in exactly the same ways as VCs do, right, they need to be able to find the best companies and get into those deals quickly and figure out the growth trajectories of these companies in exactly the same way. 

And then, at the same time, they need to manage the internal piece. They need to be able to make sure that they're also communicating back to the parent company. Increasingly — and I think this is what we're going to talk about a little bit more in this discussion — they have to make sure that they're getting those strategic benefits for the parent company from the startups that they're investing in. 

That is often by far the hardest part of this, because you're dealing with, sometimes, business units that are not incentivized to take on a project with a random startup they've never heard of. There's all this, “Well, we have an R&D department, so why do we need this thing?” So they have to be incredibly good at mobilizing excitement. They have to be communicating really well back to the CFO of the company: “Why are we spending all this money on these startups?”

Because — you know even better than I do — how VC is a really long game. It takes seven to ten years, maybe longer, to get something out of it. And yet, you're having to manage a corporate C-suite that is thinking quarter to quarter. There's a certain amount of impatience that they have to manage.

There are all of these factors. And while at the same time, you're doing all of the same things. You might be sitting on startup boards, and you're still trying to make sure that you've got the right AI investments as that sector moves at breakneck pace. So that's a hard job. That's why I think it's an interesting one. The people who do it really well — the people who can manage both of those sides — are extremely rare.

There are a few. Mostly, the teams cover it by having a real mix on their team. So they'll have some people who are good at internal networking and stakeholder management, and then they'll have people who are great investors and external networkers. Then, you have these rare individuals who can really be across both.

Fred Schonenberg
It's fascinating. I want to dig in on this, because one of the things that's interesting is that I talked to a CEO of a publicly traded company, and the subject turned to corporate venture capital. He goes, “Fred, investors give me money instead of putting it into a venture capital fund. They give it to me because of what we do. Why would I take that money and invest it into startups that I don’t have any control over?” It was a very interesting point. I said, “Well, look…” and I started to talk about the strategic side. Any CVC you talk to, there’s this tension between financial returns like a traditional VC and strategic goals, where they're feeding back into the business and complementing the core in some way. 

I think it is such a powerful dynamic if you get it right. But how would you answer that question back to a CEO who goes, Why would I ever launch a CVC? I'm not an investor. What's the benefit?

Maija Palmer
Yeah, no, it’s a good question, and one that all the CVCs have to answer in some way when they're talking to their C-suite to try to get the thing launched. I think the quick answer is: however big your internal development budget is, it’s not going to match the hundreds of billions of dollars being poured at this very minute by the VC community into startups.

You might have the world’s largest R&D program, but your individual program will never match the breadth and speed of what's being developed on the outside. So, I think companies that really want to make sure they don’t get left behind have to have a foot in both camps. Do your proprietary R&D internal stuff for the things that you absolutely must have sole control over but have at least a little stake in the external innovation ecosystem. Because you just don’t know when those things are going to overtake.

Sometimes, if you go back seven years or so, there was a real boom in startups. A lot of companies invested because it felt like, Oh my god, we’re going to be completely displaced by them. All banks will be swept away by neo banks, or whatever it is . Some of those reactions were a little panicky in the past. But what always transpires after the hype goes away is that no, things are not universally swept away. The existing banks still exist. They now coexist with neo banks and other fintechs. 

But at the same time, I don’t think you can afford to be complacent. There are always aspects of development — AI, occupation, customer service interfaces that can sweep the board. And if you’re not keeping a stake there, if you’re not able to access those trends as they gain momentum, you’ll find it hard to keep up with that. And your competitors will be the ones doing the deal with that hot startup before you do. So I think it's a sort of a recognition that you just can't do it all yourself, is the short answer to my very long…

Fred Schonenberg
No. And it's, I love the nuance of your answer too. But it's very interesting. I mean, we, you know, I mentioned like a C-suite conversation. But we work with like R&D. There's this not invented here syndrome. That there's this very us or them, like it's adversarial almost. And it's like no, it's us and them. Like you guys have to do both. Like your point of like, no matter how big the R&D budget is, there's no way it competes with the VC budget. It's a really, really interesting one. I wonder, you mentioned that sort of thing seven years ago in the neobanks. How has the CVC landscape evolved since GCV was founded, 2010-ish?

Maija Palmer
Yeah. So it's gone through an interesting cycle. So probably from about 2010 to, you know, 2021 or so, we saw, we were just in this steep, steep growth. You know, the VC world was also exploding. And CVC kind of grew alongside it. So we saw the number of active CVCs, you know, just increasing. You know, we're now at about, we have about three or four times as many as we did back in 2010. So that, you know, there's just many more. I mean, our last count was something like 2,340 active corporate investors in the world. That has made at least one, you know, investment in the past year.

But up to 2022, it was just steep growth. And then of course, you know, the VC bubble burst, sort of at the end of 2021, beginning of 2022. And so the CVC industry also kind of corrected at the same time. But what was really interesting, and we've seen this sort of, you know, decrease in the number of deals and the number of active units a little bit. But what was really interesting was that it didn't fall off a cliff. It kind of corrected, but didn't disappear.

And when I first joined, and I joined about 2022, and that was when it was just starting to come off the boil. And I thought, oh gosh, you know, is this the end of this industry. And I've just joined this company at a time when it's all gonna die. Yeah. So, but because it had happened more or less in other boom and bust cycles. That, you know, and during the dot-com boom, there were also a lot of corporate investors emerging. And then they just very quickly sort of disappeared and winked out of existence when the market crashed. And I was wondering if that was going to happen again. 

But there was something different this time. It was like the industry was more mature. And so, whilst investment slowed and a few units kind of stopped operating, there was no really large-scale die-off. It was because I think it had become already quite well established that this was providing something for the corporates that wasn't going to just go away with market trends. They were willing to take that longer view.

What is fair to say is that a lot of the mandates of the corporate venture units have shifted a little bit. So, you know, again, if you're looking at 2020, 2021, it's like invest, invest, invest. Just go and be as much like a VC as you possibly can. Just go get me those deals, because there was this market frenzy. As that died down, I think corporate strategy officers and CEOs, CFOs said, okay, we still want you to do this because we can see the benefits. But be more aligned with what the corporate wants to do. Be a little bit more mindful of what's really going to be something that we can have some sort of joint partnership down the road. So we've definitely seen that shift in attitude over the past couple of years.

Now, when you talk to any head of the unit, what they really want to tell you about is their strategic successes. Because that's what's really topmost in their mind. And so you see them do things like hire more people for the business development function on their teams. This is the person whose job it is to liaise with the parent company's business units. Be there and say, what are your problems? What kinds of things are you finding difficult to solve internally? Let me see if I can find a startup in our portfolio that could help you with that. They're investing a lot more in making sure they're doing that so that they can get these collaborations going.

Fred Schonenberg
That's really interesting on the shift. As the VC bubble sort of bursts, they start to focus more on the strategic value. And maybe these partnerships and tying into the business units. One of the things that we've seen, and certainly at the GCVI conference, a lot of traditional CVCs were talking to us about things like venture clienting, running pilots with startups, co-development, maybe joint development agreements. Is that the type of shift you've seen? And what are your thoughts on those sort of models alongside what I would call more traditional investing?

Maija Palmer
Yeah, that is definitely something we've seen as well. I mean, we do this survey every year, and we ask people what they have in their toolkit. In addition to just the traditional minority equity investment style. One thing that's been on the increase for a couple of years is both venture clienting and venture building. I think those two things for slightly different reasons.

Venture clienting is when you don't invest in the startup, but you do become a very early client for them. So you give them business perhaps earlier than your normal supplier relationships would allow. Corporates really like that and have really shifted to that. Because it often brings them to working with startups that are a little bit more ready to deploy some sort of joint project with.

If the emphasis now is on getting those strategic benefits, well the venture clienting one gets you straight into the strategic relationship. And you can cycle through quite a lot of those at a relatively low cost. Because you're not putting any equity in. If it doesn't work out, you pay for the pilot, but then you can kind of move on to the next one. No strings attached.

We've seen a few units where it's very clearly bifurcated. Where they have almost like a two-pronged strategy now. They still invest in those longer-term companies, the horizon three type startups. They'll still do equity investments with them. But for ones that are for more immediate business problems, they'll have a clienting strategy. A really good example of a company that's shifted today is Maersk, the Danish shipping company. They started off with a much more traditional model of equity investing. And then seeing if there would be some kind of collaboration down the line. Then they kind of revamped it about a year and a bit ago. It was like, no, we're going to be very focused about this.

For things that are related to logistics, how to improve the tracking of packages, and those immediate business problems, that's all venture clienting. They still need to invest in things like sustainable fuels for the shipping industry. There are not realistically a lot of things that are ready to deploy at scale. Those are ones where you probably have to become an investor in the business, help it along, and then hope that in five years’ time, some of those will have grown up and then you can start using their fuel.

Fred Schonenberg
Yeah. It's fascinating. I'm curious on the ROI side of things, right. Because in some ways, they're very different beasts. If you're looking at the traditional investing cycle, it takes a long time to have a liquefying event. You're looking at IRR and things like that, and progress. And the other one is very fast-hit. Like, you can see a pilot scale, and you've got sort of an immediate ROI. But you don't have equity in it. So you're doing a lot of work with the startup and, in many cases, helping them tremendously. How do these companies balance that? Because I could almost see a traditional CVC saying, well, wait a second, we're missing out on the upside by not getting equity in these startups.

Maija Palmer
Yeah. I guess that is the risk in the venture clienting. Although you do see that sometimes. You know, a company that does well in the venture clienting process might see an investment further down the line. So I think sometimes there are — it's not super common but you know, there is an opportunity. 

Like, BMW has the iVentures unit, and then they also have the Startup Garage, where they do a lot of the venture clienting. And there is some traffic between those two units in the sense that if something's going well in one, it might then kind of be pitched over to the other unit. Although they operate quite separately in normal times. 

Fred Schonenberg
It's very interesting. And it was funny, before we hit record, we both were like, this conversation could go on for a very long time. And we have like 500 things to talk about that we'd like to talk about. So I have a feeling I'm gonna ask you to do a round two, because we are running low on time. But I wanted to ask you this. If somebody is listening to this—let's say it's a corporate strategy officer or CEO—that is saying, you know, I'm interested in the space, but I don't even know where to start. What advice would you have for them? And then where can they go to learn more about what you all do?

Maija Palmer
So a corporate strategy officer that's thinking of building a CVC unit: what advice would I have for them? So much, right. So much. But I mean, I think you have to be really honest with yourself about what's the risk profile that you're comfortable with. Right. So I think that helps set the scene. And it has to be, because these units don't survive unless they have really strong internal buy-in at the beginning. And they won't get that buy-in unless they're really aligned to the way that the organization is capable of handling risk.

So, for example, you don't want a situation where you set up this unit and you kind of say to them, go and do all these really bold investments and, you know, think big, think Horizon 3. And then you're wanting them to knit them back into a core business unit operation that is just not going to be. It's very risk-averse. It's going to take a long time to make a decision on something. So then you're setting yourself up for failure.

If you know that the business doesn't want to take on a lot of experimentation, then maybe you need to be, you maybe need to just invest in a kind of later stage stuff that is much more ready to go. Don't go for really early seed-stage, crazy, futuristic things, at least not to start with.

And I think the other thing that I would say is maybe hire the business development, the sort of whatever-you-want-to-call-it, the platform team — the connecting between the startup and the core business — hire them on day one. What we see a lot of CVC units do is they kind of start with the investment side. So they hire in a hotshot investor from somewhere that goes and makes a couple of deals. And then it's only when they've got a sizable portfolio that they start thinking about, oh yeah, maybe we should have someone that will knit this in with our business.

And by then, depending on your situation, it might be too late. Because the business might already be getting a little bit frustrated with the fact that the CVC unit just seems to be off on a limb and doing something that nobody really knows about. So I'd kind of start it the other way around. Hire that business development person. Make sure that their starting point is getting everybody in the company really excited about what you could get from startups. And then invest.

You know, JetBlue is a good example of one where it was built that way around. And they have had great buy-in always from the rest of the company as a result of doing it that way. Their head of unit, Amy Burr, came from the business development function. So she thinks like that from the outset. 

Fred Schonenberg
Yeah. She is awesome. And also I have to say, it's very interesting. It's easier to sell the idea of working with a startup and doing a pilot. That stage of it is an easier buy-in. And then it builds that momentum within the organization. And then you see opportunistically, oh, we should invest, or we should acquire this company. And so it's easier to then build larger. It is very interesting. They usually go the other way.

Maija, this has been awesome. I'm sincerely going to try and ask you to come on again, so we could go deeper into some of the other things we had talked about ahead of time. I just wanted to thank you for all you do to spark change and for this community. Curious, where should people go to learn more about your work and read all that you're writing about?

Maija Palmer
Yeah. Well, the website is the easiest way to weigh in. So, globalventuring.com. And then from there, you know, it'll direct you to, if you're interested in events, or if you're interested in the career development piece, you'll see all the links to all that good stuff there. Sign up to the newsletter. That's fun. You know, we're always being a little bit more provocative in the newsletter than we are on the website.

Fred Schonenberg
Yeah. I love it. It's very good. Well, thank you again. This has been awesome.

Maija Palmer
Thanks again. I'd love to come back, and thanks for having me.