1. @NYUEntrepreneur
Spins on Corporate
Venture Capital
Frank Rimalovski
Executive Director, NYU Entrepreneurial Institute
Managing Director, NYU Innovation Venture Fund
Adjunct Professor, NYU Polytechnic School of Engineering
@rimalovski
April 13, 2015
2. @NYUEntrepreneur
Agenda
u Corporate venture capital
o Motivations & models
o Challenges & consequences
u Corporate Spinouts
o Challenges
o Lucent’s New Ventures Groups
o New Venture Partners
u Universities
o NYU Innovation Venture Fund
o Similarities & differences
3. @NYUEntrepreneur
Corporate Venture Capital 101
Motivations
u Strategic *
o Provide a window on new
technology (85%)
o Support/leverage existing
businesses (69%)
o Provide window on new
markets (58%)
o Develop new products
(56%)
o Seek new directions (55%)
u Financial
o ROI
Models
u Direct
o In-house venture teams
o Separate CVC groups/
funds
u Indirect
o Invest as LP in externally
managed funds
u Incubators with or
without venture funds
o Spin-in
o Spin-out
* Source: Corporate Venture Capital Study, NIST/MIT 2007
4. @NYUEntrepreneur
Corporate Venture Capital 201
Challenges *
u Lack of well defined/
shifting missions
u Insufficient corporate
commitment
u Inadequate
compensation
schemes
* Source: Gompers & Lerner, The Venture Capital Cycle
Consequences
u Conflicting agendas
with VCs/
entrepreneurs
u Slow decision making
u Shallow pockets
u Short lived funds
u Attracts ‘B’ players
u Not welcome by some
VCs/entrepreneurs
6. @NYUEntrepreneur
The Search for Innovation…
“The search for innovation needs
to be organizationally separate
and outside of the ongoing
managerial business. Innovative
organizations realize that one
cannot simultaneously create the
new and take care of what one
already has...”
~ Peter Drucker, 1974
7. @NYUEntrepreneur
Intrapreneurship challenges
u R&D not always well linked to markets
u Lack of true entrepreneurs
u Underestimating time & funding required
u Overestimating corporate synergies
u Lacked “credible threat” of discontinued funding
u Different biz models make it hard to support
u Different metrics lead to poor decision making
u Ignores portfolio theory
u Different decision making/funding timelines
u Risk tolerance/acceptance of failure
10. @NYUEntrepreneur
1996: Lucent forms New Ventures Group
u To commercialize “discontinuous”
innovations
u For strategic innovations that can be
developed faster in a venture model
u Mission
o Leverage Bell Labs technology to create new
ventures to innovations to market quickly
o Create more entrepreneurial environment that
nurtures & rewards speed, teamwork and
prudent risk-taking
o Realize value by selling ventures to Lucent
BUs or external investors and/or corporations
1876
1947
1954
1958
1962
1969
1999
11. @NYUEntrepreneur
NVG Experience
u Challenges
o Finding the right people to join a startup (inside/out)
o “Spotlight effect”
o Ebbs & flows of macro & micro economic factors
o Contributing to quarterly & annual targets
o Lacked “credible threat” of discontinued funding (early on)
u Critical success factors
o Executive sponsorship with “use it or lose it” POV
o Strong supply/deal flow with lots of pent up supply initially
o Good timing = strong demand / ease of syndication
o Aligned comp incentives: people do what they’re paid to
o Syndication led to more entrepreneurial behavior, risk
sharing, etc.
21. @NYUEntrepreneur
NYU Innovation Venture Fund
u Philanthropic seed fund
u Evergreen: NYU sole “LP”
u Active diligence
u Help build smart syndicates
u $100-200k direct investments
u Converts, Series Seed & A
u Board observer seats
u Opportunistic follow-ons
21
I V F
24. @NYUEntrepreneur
By the Numbers
24
Investments
10
Sectors
Info Tech: 7*
Life Sci/Health: 4*
NYU Founders (School)
CAS: 2 Medicine: 6 Eng: 1
Stern: 5 Dentistry: 2
Law: 1 Courant: 1
NYU Founders (Type)
Students: 8
Faculty: 8
Researcher: 2
IT Investments
Hardware: 2
Software: 5
Invested Capital
Invested: $1,125,000
Value: $1,289,309
Female Cofounders
40%
Total Capital Raised
$20,490,000 (>18x)
25. @NYUEntrepreneur
Why this investment model?
u Participate in larger rounds to achieve
meaningful milestones & value inflection
u Invest as part of a larger syndicate
o Leverage diligence, expertise &
connections
o Follow-on financial support
o Co-investors to serve on boards
u Other sources exist in/outside NYU to fill
pre-VC needs
25
26. @NYUEntrepreneur
Critical Role of the Fund
u Return on investment
u Demonstrates University commitment &
importance of entrepreneurship
u Raises NYU's profile amongst peer
institutions & government agencies
u Credibility & bridge building with NYC
investor community
u A catalyst for entrepreneurship within NYU
26
28. @NYUEntrepreneur
Universities & Corporates
Similarities
u Often based on research
u Publishing & recognition
driven
u Gov’t & corporate grant
funding
u Need to evangelize
entrepreneurship
u Personnel not always
suitable for a startup
u A lot of handholding
Differences
u Limited development
u Not measured on IP
creation
u Less access to
commercial validation
u Less aware of IP &
commercialization
pathways
u No secondment
u College is a lot more fun!