Contents 3 Cultivating Startup Mojo Page 5 Why Time Warner and others use accelerators Page 7 Pros &...

About

Innovation Leader is aninformation service oncorporate innovation. Led byaward-winning journalist andauthor Scott Kirsner,Innovation Leader providesaction-oriented tactics andstrategies for corporateexecutives. Visit us online atInnovationLeader.com.

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Innovation Leader’s P2P Series collects the best“peer-to-peer” advice on a given theme — in thiscase, the relationship between establishedcompanies and startups. For this report, wespoke to CEOs and innovation executives atcompanies like General Electric, Athenahealth,Time Warner, Campbell’s Soup, and others,along with several venture capitalists. Some ofthis material has appeared online, but some ofit can only be found here.

This is one of the themes we’ll be exploring atour Field Study gathering in Boston, on June 19+ 20. Several people interviewed for this report will be participating, and wehope you can join us to contribute to the discussion.

We welcome your ideas for topics worth exploring in a future P2P report.And we invite you to share this report via e-mail with colleagues who mightfind it helpful ... but please don’t post this online in a public forum.

Thanks for all your support and input, and I look forward to hearing yourfeedback and ideas.

Scott [email protected]@InnoLead

Table of Contents

Page 3 Cultivating Startup Mojo

Page 5 Why Time Warner and others use accelerators

Page 7 Pros & cons of hosting a startup accelerator

Page 9 Why you shouldn’t launch that startup accelerator

Page 11 Creating a place for startups at headquarters

Page 12 GE Appliances plugs in to local startup ecosystem

Page 14 How Athenahealth built a "disruptive ecosystem"

Page 16 Coke's innovation VP on connecting with startups

Page 17 Hackathons: Five keys to success, real life examples

Page 19 Doing corporate VC right: Top 10 recommendations

Page 23 Venture capital viewpoint: Insights from investors

Page 25 Startup Mojo Scorecard

Contents

E D I T O R I A L

Scott [email protected]

S U B S C R I P T I O N S

Scott [email protected]

A D V E R T I S I N G

Frank [email protected]

C O N T A C T

[email protected]

P.O. Box 588Ipswich, MA 01938


One sunny fall afternoon in Cambridge, after an al frescolunch, I was walking alongside an entrepreneur named BillWarner. Warner (at right) isn’t a household name, but hestarted an incredibly disruptive company called AvidTechnology, now publicly-traded, and he won an Oscar andan Emmy for transforming the way movies and TV showsare edited. He also started a company that developed anearly (too early) voice-guided personal assistant, twodecades before Apple’s Siri.

“Big companies can’t do innovation internally,” Warnerwas telling me. “Startups are just so much more motivated.They’re genetically engineered to innovate — or die. Bigcompanies don’t have that sense of life or death. Peoplehave this belief that their job will be there next year.”

Just as Warner was finishing his pronouncement, someonecalled out to us from the steps of the MIT Media Lab. It wasDave Balter, a well-known local entrepreneur who had justbeen hired to make investments in startups for a division ofTesco PLC. The British retailer has 500,000 employees,and is the third-largest merchant in the world, after Wal-Mart and Carrefour. (Its same-store sales have also beendropping lately.) Accompanying Balter was Philip Clarke,Tesco’s CEO. He was on a tour of the Boston area, viewingtechnology demos at the Media Lab and visiting incubatorsthat house dozens of startup companies.

Clarke was trying to plug into the Boston-area startupscene, to understand where the next disruption tomarketing or payment might come from, or the next must-have consumer product. (Among the demos he saw was acountertop tortilla machine, which produces individualtortillas the way a Keurig cranks out a cup of coffee.) It wassurprising to see a CEO investing time to cultivate a sensefor the startups in his space — perhaps acknowledging atleast some of Warner’s pronouncement about bigcompanies and innovation.

It’s an extremely unusual thing to find public companyCEOs prowling research labs and popping into startupaccelerators to chat up entrepreneurs. Most largecompanies leave the startup relationship to their mergers-and-acquisitions group, or the corporate venture capitalteam — if they have one. In our interviews with more than

100 innovation leaders at large organizations in the U.S.and Europe, one of the areas that has received the leastfocus and action is how to track and interact with startups.

And one thing is certain about that strategy: it will lead toan erosion of competitive advantage, no matter whatindustry you are in. Disruptive startups are springing up tochallenge incumbents, and they’re able to win customersand gain market share faster than ever, thanks to socialmedia, online purchasing, new on-demand labor models,and the ability to deliver service and support efficientlythrough digital channels. Has your industry been knockedon its butt yet by an Amazon, Netflix, LinkedIn, Uber,Airbnb, Sodastream, Zappos, RetailMeNot, RethinkRobotics, Postmates, or TaskRabbit? If not, it will be.

Yet as soon as a company joins the billion-dollar revenueclub, it tends to lower the portcullis and make it incrediblydifficult for startups to get in — to discuss a sales ordistribution partnership, an investment, a new technologythat could reinvigorate a tired product line. Even when theportcullis isn’t down, employees of the company very rarelycross the drawbridge and interact with fledgling companiesin a proactive way.

Cultivating Startup Mojo


The best large companies are developing new skills relatedto working with startups. Some, like Tesco, are visitingstartups in their native environments. Others, like Hasbro,are holding hackathons open to anyone, to spark ideasabout new directions for their products. Disneyannounced in February its intention to join the ranks ofmore than a dozen companies that host acceleratorprograms for entrepreneurs (see image above). Not longafter, Siemens created a new $100 million investment fundthat will back startups focused on industrial automationand manufacturing technologies.

Not all of those strategies will work for every company, anddoing all of them at once is a recipe for disaster. Butcompanies that want to maintain their status as innovationleaders in the 21st century need to cultivate what we callStartup Mojo.

Startup Mojo entails having a clear strategy for doing thefive things below — or a coherent reason why you are notdoing them right now.

1. We have developed “startup sonar” in multiple areasof our business, identifying and tracking the startupventures that have the biggest potential to impact usor our customers.

2. We are the easiest company in our industry forstartups to partner with.

3. Our corporate ventures team is the first stop forstartups raising money in our industry.

4. We offer assistance to startups in concrete ways (e.g.,mentorship from our employees, an accelerator

program, free office space at headquarters, eventsthat help us both understand industry trends).

5. Our culture is able to use/sell/distribute productsdeveloped by startups, and able to integrate startupsthat have been acquired.

Achieving Startup Mojo has multiplier effects. Once you’veshown that you can invest in startups, help them succeed,distribute their products, or acquire and integrate themwith a minimum of turmoil, more of the best startups willgravitate to you. Startup Mojo can help you endure majorshifts in technology or the composition of your customerbase, and they can help you enter new markets.

You'll notice people using the term "API" often in thesepages. An API, in the technical sense, is the applicationprogramming interface that lets two pieces of softwaremade by different companies talk to each other. But in theStartup Mojo context, it is the person or people whounderstand how to become your organization's interface tothe outside world. Innovation Leaders need to design andmaintain that API.

Startup Mojo, we believe, is becoming an essential qualityfor companies that hope to establish or maintain adominant position. (If you are certain that your employeescan spot every new opportunity, pick every winningtechnology, and intuit every nascent customer need — well,good luck!) We’ve been collecting guidance fromcompanies that have traveled the furthest down the road indeveloping it. But we are by no means finished collectingadvice and case studies about this theme, so please get intouch if you’ve got something to share.


How do big companies collaborate more strategically withstartups, and soak up a bit of entrepreneurial energythemselves?

A growing number — about 15, according to our count — aresponsoring or running accelerator programs. These offerfree office space for several months to chosenentrepreneurs, along with mentorship and a chance tomeet prospective investors or business partners. There’susually a small cash stipend to cover the living expenses ofeach startup team, and sometimes that cash buys a smallslice of equity in each venture. Among those who havelaunched corporate accelerators so far: Nike, Microsoft,Volkswagen, and Kaplan Inc., the test prep and onlineeducation company. One key objective: finding andcollaborating with entrepreneurs who are working on newproducts and services central to the sponsoring company’sfuture.

But is there really substantial upside in devoting time andresources to running a corporate accelerator? After all, it’smuch simpler to just show up to a Techstars or YCombinator “demo day,” schmooze with the participants,and forge new relationships that way.

We spoke with executives at Turner Broadcasting Inc.;Blue Cross Blue Shield of Massachusetts; and Techstars,which has operated accelerator programs for several largecompanies, including Nike, to understand the rationalesfor starting a corporate accelerator program — and what toexpect as far as outcomes.

Time Warner

Two Time Warner divisions, Turner Broadcasting andWarner Bros., run Media Camp, an accelerator programfocused on media startups. The two separate programs takeplace in San Francisco and Los Angeles.

Balaji Gopinath, Vice President of Emerging Technologyat Turner Broadcasting, says, “We opted to do theaccelerator ourselves, because if you’re not part of thecompany, how can you really understand what the strategic

levers are here? And our primary focus is to add strategicvalue to the company.” Any benefits from investing in thestartups that participate in Media Camp, Gopinath says, “isicing on the cake.”

Turner started Media Camp in 2012, choosing six startupsto participate in the twelve week program. Turner hired aproject manager to help oversee the program. (Everyoneelse who works on Turner’s Media Camp has a “day job” inthe company’s emerging technology group.) This year,Warner Bros. started its own Media Camp program in LosAngeles. The Los Angeles program tends to focus more onfilm and content creation, where the San Franciscoprogram focuses more on new media distributiontechnologies, says Sandy Khaund, a Turner executive whoworks with Gopinath on the program.

Khaund says one of the biggest challenges in creating anaccelerator program is providing enough value for thestartups that participate — and doing the same for hisemployer. “Turner pays our salary, so we have to do well bythem, but we also have to help the startups,” he says. Muchof that help takes the form of making connections withinTurner (which operates cable channels like CartoonNetwork, CNN, and TBS.) In one instance, a Media Campstartup called Chute met with an executive responsible for

Why Time Warner andothers use accelerators


CNN’s social media initiatives, and within a week, they hadtheir technology working on CNN’s website — just in timefor the 2012 Republican National Convention. As aformer entrepreneur, Khaund says, that kind of speedydeployment is unusual: “I remember how hard it was to getin the door of a potential customer.”

Khaund says that for a typical Media Camp class of aboutfive companies, he and the team review 200 to 300applications, bring in 10 to 15 entrepreneurs for aninterview, and make offers to five to participate. They tendto look for startups that have alreadybuilt a prototype, as opposed tothose with a raw idea. “We considerourselves a graduate school,”Gopinath says. “We get a lot ofpeople who have been through otheraccelerator programs, such as YCombinator and Techstars.”

In terms of metrics, Khaund admitsthat during the first Media Campprogram, “We weren’t veryregimented about what the goalswere. It was uncharted territory.”But now, Media Camp tracks “thenumber of pilots we can launch,whether they’re gratis or for pay —something where a brand at Turnerfinds a great product.” He adds thattwo of the original class of sixstartups were acquired, and also,“the enthusiasm about working withthe Media Camp companies is a lothigher in Atlanta,” Turner’sheadquarters.

Media Camp startups travel toAtlanta to meet executives there, and at the most recentdemo day event, in San Francisco, Turner BroadcastingCEO Phil Kent kicked things off. Another interesting note:when startups strut their stuff at the demo day, Turnerinvites its competitors to be in the audience. “The startupsneed to get exposure to as many big companies as possible,”says Khaund. And the presence of other media companiesat the event also can spur Turner and Time Warner execsto start working on partnerships with the Media Campstartups, rather than sit on the fence. Khaund also says thatTurner’s relationship with the Media Camp startups is veryloose: it doesn’t prevent the startups from serving other

media companies, or even grant Turner a right-of-first-refusal if a startup gets an acquisition offer. “We didn’twant the companies to think they’d be locked into Turnerif they decide to participate in Media Camp,” Khaund says.

Khaund says he has been hearing from lots of othercompanies that are considering accelerators. His advice? “Ittakes a lot of open-mindedness. You have to really beexcited about wanting to work with partners. At Turner, wehave a great digital team, but you can never have enoughgreat ideas. If your customer is your greatest concern, some

of the best ideas can always comefrom outside. We may not find thenext Facebook, but we are lookingfor companies with that same kindof game-changing potential,companies that are changing theway people watch TV.”

Many companies, says Khaund, aredominated by “not-invented-heresyndrome.” Everything good mustoriginate internally. He says, “Ifyou’re that way, you won’t succeedwith an accelerator. You have toacknowledge that sometechnologies might be built fasterexternally.”

Gopinath says that one keycompetitive reason for startingMedia Camp was to “figure outwhat the next generation ofentertainment products andservices will look like,” faster thanother large media companies. Andby designing and operating its ownaccelerator program, without a

partner, Gopinath says, “you can have a bigger impact onthe company’s DNA.”

Blue Cross Blue Shield of Massachusetts

Blue Cross Blue Shield, a health insurer with about 3,500employees and $6 billion in revenue, traveled a differentpath. It decided to partner with Healthbox, an existingaccelerator program focused on e-healthcare startups, tobring the Healthbox program Boston in 2012.

TemiTuoyo Louis, director of strategic investments at BlueCross Blue Shield of Massachusetts, says the companyinitially thought about starting its own accelerator from

“It takes a lot ofopen-mindedness.You have to reallybe excited about

wanting to work withpartners. At Turner,we have a greatdigital team, butyou can neverhave enoughgreat ideas.”


scratch, as Time Warner did. But “we realized we didn’thave the bandwidth, network, or experience to fullysupport a program for seed-stage companies.” Louis hadbeen to a demo day run by Healthbox in Chicago, so hebegan talking with their staff about bringing the program toBoston. The idea had to win the approval of BCBS’ chiefexecutive and chief financial officer. Both executives, Louissays, “believed that participating in the development of newsolutions that aim to tackle the most pressing challenges inthe industry supports our vision of making quality healthcare affordable while adding growth to our local economy.”

The key metrics that Louis has tracked, as BCBS andHealthbox have cycled through two batches of startups, arejobs created; pilot programs launched, and their outcomes;and how many BCBS employees get engaged in the

Healthbox program. Louis says that so far, 19 startups havecompleted 55 pilot tests. About 50 new jobs have beencreated, and more than 350 BCBS employees participatedin Healthbox in 2013, up from about 180 in the program’sinaugural year in Boston.

What’s the key to successfully launching an acceleratorprogram? “Be comfortable with assuming risk, getassociates involved, always keep the end user/customer inmind, and enjoy the ride,” Louis says.

Techstars

Techstars, which runs its own accelerator program in NewYork, Boulder, Boston, and other cities, partners withcompanies like Kaplan and Microsoft to operate theiraccelerator programs.

GUEST COLUMN

By TemiTuoyo Lewis, Director of Strategic Investments, Blue Cross Blue Shield of Massachusetts

Blue Cross Blue Shield of Massachusetts aimed to identify startups that address challenges in the health caresystem, have the potential to favorably impact our members’ health care, and support our vision of makingquality health care affordable. There are multiple ways to solve problems that impact our industry. Largeorganizations need to be willing to listen, learn, and see things from a different perspective. Here are some of thepros and cons to consider when thinking about operating an accelerator program.

Pros

• I like the quote from Albert Einstein: “The thinking that got us into our problem is not the thinking thatwill get us out.” Collaborating with startups forces large organizations to look at problems in a differentway. Startups provide a fresh perspective on problem-solving and creative pathways to resolutions.

• Startups can help large organizations navigate in the thick fog to find new trails.• Forces companies to operate with speed.• To implement innovative and disruptive offerings, large organizations have to identify solutions from a

multitude of sources. Startups are an excellent source of innovation.

Cons

• The challenges working with startups involve speed and culture. Large organizations can be consensus-driven, and have a number of layers to get to “yes.” This can clash with startups, as they are used to makingquick decisions, building, testing, failing, iterating all within twelve hours! There are conflicts of culture attimes. From the startup’s perspective, this often leads to longer sales cycles and frustration. Finding theright balance between the two cultures is a key to a fruitful relationship.

• The other problem is risk: you can spend capital and use resources working with a company that has agreat idea — but the company may not exist in a few months.

From BCBS: Pros & cons of hosting startup accelerators


Dave Drach is a former Microsoft executive who nowoversees business development for Techstars. “Companiesare doing two types of things with accelerators,” Drach says.“They’re either trying to develop an ecosystem of startupsthat work with their product or their technology, likeMicrosoft and its Kinect platform, or they’re trying toexplore a thesis about the future of their industry, likeevolving forms of education, in Kaplan’s case.”

Techstars deploys a team of about 10 employees to run eachcorporate accelerator, and the corporate sponsor pays it anoperating fee to run the program. Techstars provides theseed funding — $20,000 in return for 6 percent in equity ineach startup. (As a result, Techstars holds onto the equity.)In some programs, the sponsoring company provides theoption of additional financing to the teams that participate,in the form of $100,000 in convertible debt. Techstarschooses the companies that are admitted to each program.

In terms of the outcome, Drach says that ideally, “We wantto see three deep engagements out of a class of 10companies. Those could be co-marketing arrangements,acquisitions, or an investment.” Drach points to situationslike Microsoft acquiring one of the participants of itsaccelerator program. But he says that there can be powerful

cultural benefits, too.

“Nike is an incredibly innovative company as it is, but theyhad their staff and executives really engaged in their Nike+ Accelerator,” he says. “Just seeing how the startupsfocused and executed got them thinking differently aboutdelivering products on a rapid timeline.” And for most ofthe companies that get involved with accelerators, “It’s areally powerful way for them to learn what’s going on in theearly-stage tech ecosystem,” Drach says.

Conclusion

But Khaund, the Turner Broadcasting executive, cautionsthat many companies diving into the world of acceleratorsare doing it because of FOMO: Fear of Missing Out. “A lotof people are going in thinking that this is the new big thing.It sounds innovative: let me reach out to startups. But theeyes can be bigger than the stomach. You really need tounderstand how you’re going to measure it, whether yourcompany can accept and work with new technologies andproducts that it didn’t develop, and what your keyperformance indicators are going to be — how are you goingto measure it?”

Join Innovation Leader for a two-day “field study” ofinnovation labs and incubators in Boston and Cambridge.

Your guides: Innovation executives from Fidelity, J&J,VMware, Shell Technology Ventures, and others.

http://innovationleader.com/june2014


GUEST COLUMN

By Dave Drach, VP Business Development, Techstars

I get scads of phone calls and e-mails every week fromexecutives at big companies interested in getting closer tothe entrepreneurial world, and considering the possibilityof starting an accelerator program. Here is what I tell them:You should probably not do it.And Imean byyourself, withanybody, with Techstars, or with any other organization.

Committing to running an accelerator is a bigcommitment. It’s a big commitment for your corporation,a big commitment for the entrepreneurs you select, a bigcommitment for the mentors, and a big commitment forthe investors.

These are the five major reasons why your corporationshould NOT run a startup accelerator.

1. I want to understand how startups work and why theyare so successful.

First of all, startups, typically, are NOT successful. We’vebeen extremely focused on supporting startups in every waywe can. But even though the failure rate for TechStarsventures is below 12 percent, the industry average is closerto 80 percent. Failure is a key part of the entrepreneurialethos, so if you aren’t ready to embrace failure, then youshouldn’t be dabbling in the world of accelerators. Youneed to focus on changing your culture first.

2. I want my company to be viewed as innovative.

You don’t need to commit to running a startup accelerator— a huge investment of resources, money, and time — toachieve this goal. Engaging in your local startup ecosystemwill help you understand what disruptive things arehappening outside your walls. You can run marketing andbranding campaigns that can highlight innovative thingshappening within your organization, or showcase ways youare working with startups. Starting an accelerator is not thesolution here. Also consider the image hit you’ll take if yourun one for a year or two and then shut it down.

3. We want to be a venture capitalist, and put money intopromising new ventures.

No you don’t. Be very clear on your strategy and how yourcompany intends to grow, whether it’s throughacquisitions, OEM deals, distribution partnerships, openinnovation programs, crowdsourcing, etc. Get thosestrategies nailed down first, and then figure out if makingstrategic investments ought to be a key part of that. It canbe hard to attract the right people and start seeing the bestdeals, and there are many professional investment firmsthat have been doing it for a very long time. We certainlyencourage strategic investing, and we support it with manyof our “powered by Techstars” partners like Disney andKaplan. But figure out the strategy first; don’t dabble as aVC. Even without putting a dollar of capital into startups,you can engage and collaborate with them, and help thempioneer new markets and product categories. In return,they will help you.

Why you shouldn’t launchthat startup accelerator


4. We are thinking about our new API platform, or a newproduct line, and we want entrepreneurs to build thingsthat connect to what we are doing.

The challenge with this reason is the word “new.”Leveraging a startup accelerator, an incubator, or justtraditional partnering within the startup ecosystem is agood way to get people excited about an API or developerplatform — if that platform is fully fleshed-out, has strongsupport, a committed development team, is agile, and isready to evolve as fast as the startups will drive it. Startupsare high-frequency, high-horsepower, market-drivenmachines. They won’t wait six months for you to fixsomething that is not working. A good analogy would be,‘Let’s try out those new tires we just designed at the MonacoGrand Prix.’ People will get hurt. Don’t do it.

5. We need the technical innovations that startups canbring us.

Some of the most talented technical people I have ever metcall large corporate R&D organizations home. So if you arelooking for the very best technologists, they may not comefrom startups. Technologists, hackers, and coders whowork for startups are scrappy, innovative, and agile. If youhave not already adopted agile techniques and lean startupmethodologies, engage a team like the Lean StartupMachine and get trained. That is much better than runningyour own accelerator — and more scalable throughout yourorganization as well.

* * *

These days I often get into conversations with corporateexecutives and with founders that leave me with the feelingthat the two groups are totally fascinated with each otherright now. Startup founders are fascinated by the reach andresources that the corporates have. Corporate executivesare fascinated with the passion and speed of the startups.

But before you decide to move in together — and actuallyhouse startups in your offices with an accelerator program— why not spend some time dating and introducing thefamilies first? There are no barriers to engaging with thestartup world. There are Startup Weekends, hackathons,meetups, Founder Institute, Techstars, demo days run byother accelerator programs and universities, etc. Walk outyour door and see what’s happening and get a feel for thescene. Do some mentoring at an existing program forentrepreneurs. Invite startups to your company’sInnovation Day to showcase what they’re working on. Seewhether there are business unit executives or others in yourorganization who will join you, and see if the interactionsstart to spark ideas and create momentum.

When you have determined the culture is ready, thecommitment level is there, and you understand how bothyour organization and the startups can benefit — that’swhen to seriously consider running your own accelerator.


The digital marketing firm Constant Contact announcedin January 2014 that it will carve out 30,000 square feet atits Boston-area headquarters to become the Small BusinessInnoLoft. The space will be home to Constant Contact'sinternal innovation team, as well as a handful of startups onrotating four-month residencies. The InnoLoft is expectedto be open by June, with the first set of three to five startupsmoving in over the summer. All of the fledgling companieswill be focused on creating products and services for smallbusinesses.

Chosen ventures will have access to Constant Contactcustomers that have volunteered as beta testers; $10,000 inmarketing dollars (actual money, as opposed to credit forConstant Contact products), along with advice fromcompany marketing execs on how to spend it; and priorityaccess to Constant Contact's APIs.

“We’re not taking equity,” explains Andy Miller, chiefinnovation architect at Constant Contact. (Miller is atright, starting demolition on the space that will become theInnoLoft.) "That's a big differentiator from other kinds ofaccelerator programs. But this is sort of accelerator-like inthat our goal is to really help startups get to product-marketfit. We want to help them scale, as experts in the smallbusiness category, and we want to get them in front of someof our 585,000 customers." Miller says he sees the InnoLoftas an ideal landing pad for startups that may have alreadyparticipated in other accelerator programs (two prominentones in the Boston area are Techstars Boston andMassChallenge). “I don’t think it’s going to be geared tostartups that are still at the stage of trying to figure out if theyhave a product,” he says. Miller arrived at the company afterhis own startup, the loyalty app CardStar, was acquired byConstant Contact in 2012.

Miller says that the InnoLoft will also host events forentrepreneurs and investors. He describes the loft as"similar to what a SoHo artist would have. There will be big

sliding doors, reclaimed wood and aluminum."

Miller leads a 15-person innovation team that vets newconcepts and builds prototypes at publicly-held ConstantContact, best known for its e-mail marketing tools. "We feltthat having our innovators working side-by-side withstartups, learning from and helping one another, was agreat idea," he says. While Miller says Constant Contactdoesn't have any plans to start investing in small business-focused startups, "there are a multitude of opportunitiesthat could come from this," he says, including partnershipsand acquisitions.

Another goal of the InnoLoft, Miller acknowledges, is“getting the word out that we’re driving innovation, andhelp the company become more of a thought leader fromthe innovation perspective.”

Creating a place forstartups at headquarters


Two people in Louisville were thinking about the sameproblem. They came up with a brilliant solution.

Ted Smith, head of the city’s department of economicgrowth and innovation, was wondering how to create newkinds of connections between Louisville startups and someof the city’s Fortune 500 companies. And VenkatVenkatakrishnan, director of advanced technologies forGE Appliances, wanted to enhance his radar for new ideasthat could impact his business.

“We get lots of e-mail every week from companies in theNortheast corridor and California wanting to talk to usabout new technologies,” Venkatakrishnan says. “Tedwould always say, ‘We have a lot ofentrepreneurs right here inLouisville.’ But I said, ‘We nevermeet them.”

So last October, GE Appliancesopened the doors of AppliancePark, a 900-acre manufacturing andR&D campus, to local startups.Here’s how the first-time eventcame together — and what GEexpected to get out of it.

Smith says his “goals are very mucheconomic development goals, but we are trying to rethinkhow you solve that problem — how a city like ours can doeconomic development.” (Smith reports directly to MayorGreg Fischer, an inventor and entrepreneur elected in2011.) One idea he’d seen was a “reverse pitchathon.”Instead of startups pitching their wares to big companies,the big companies did the pitching, describing challengesthey needed help with, or areas where they were looking forpartners. As Smith saw it, that sort of event could “help theengineering and entrepreneurial community really get toknow the bigger companies,” and the resultingpartnerships might help those smaller companies grow.

GE Appliances has been trying to shift its focus from “we

do it all the best” to “we solve consumers’ problems thebest,” making better use of external partners and solutionsdeveloped by others. Venkatakrishnan says that “my job asR&D leader got redefined ten years ago. It’s not about meand my engineers inventing things. It is also about findingwhat is out there. This business needs a network that isglobal as well as local. Our challenge has become, how canI find a technology that I will be the first to apply, not, whatdo I invent tomorrow? A lot of breakthrough innovationscome from smaller companies. The high-risk stuff is justdifficult for us to do.” (GE’s Appliances & Lightingsegment had 2013 revenues of $8.3 billion. Profits in thatbusiness were up 23 percent over the prior year.)

There were naturally worries aboutdescribing the problems GE wastrying to solve in too much detail.“But the appliance guys are allthinking about the same stuff,”Venkatakrishnan says. “If you’re incell phones, you can tell me the tenthings Apple and Samsung shouldbe working on.” Still, he admits,“there were people who werenervous about how much we weresharing.”

The October event, dubbed the GE Entrepreneur OpenHouse, was open to anyone. It was held in the evening.About 40 people attended. Venkatakrishnan says hefocused on four major themes:

1. Explaining in simple terms the problems his group istrying to solve. “We went product line by productline. Here’s cooking, what the market looks like, whatthe challenges are. Things like, can you use sensors totell you when your cake is done, rather than pokingit with a toothpick?” Venkatakrishnan also discussedareas of the home where GE currently doesn’t sellappliances, and the opportunities there.

2. What does it take to work with GE? “In real life, we

GE Appliances plugs into local startup ecosystem

“We have a successrate of about 20percent when we

work withsomeone.”


don’t look at an idea and give you a million dollars.There are agreements and NDAs and milestones.”

3. How long does it take to do something with GE?“Software is easy, but building new hardware can taketwo to three years. That’s just the reality.”

4. Examples of technologies GE has brought to market,and how it happened. “We have a success rate ofabout 20 percent when we work with someone, interms of figuring out all the details and making asuccessful product.”

Venkatakrishnan says he brought a number of hiscolleagues to the event, and made sure to explain how to getin touch with the company afterward. “I also said, ‘If youknow anyone who has an idea, point them to us,’” he says.The presentations at the Entrepreneur Open House lastedabout 90 minutes, with time afterward for questions, andnetworking over drinks and snacks. (Venkatakrishnan saysthat he got more requests from GE employees to attend theevent than he could handle: “They want more interactionwith the community,” he says.)

The outcome? Lots of new contacts with both smallcompanies and academics. “I just had a follow-up meetingwith a three-person company working on sensors,”Venkatakrishnan says. “Our local university sent a bunchof professors to the event, and they are now working todevelop some new materials that might be useful for us.”

“Ideas for products can come from anyone,” he says.Following the Entrepreneur Open House, he says GE

Appliances is thinking about doing similar events in othergeographies, or focused on a single topic, like coatings orsensors. And Smith at the City of Louisville says he’splanning to do more open houses with other largecompanies in 2014.

GE Agenda:

Evening started with a welcome by Greater LouisvilleInc. (the local chamber of commerce) and theMayor’s office.

GE’s Venkat Venkatakrishnan then covered theprocess by which the company works with startupsand small companies…timing, IP, cost sharing, etc.Venkatakrishnan provided some examples ofsuccesses and failures working with small companies.

GE then covered key challenges by product lines(overviews were provided by product managers foreach line):

– Cooking

– Laundry

– Refrigeration

– Dishwashing

– Electronics and software

Event concluded with Q&A and a networkingsession.


Athenahealth, a publicly-traded company based nearBoston, has been pretty disruptive in its own right. It helpsmore than 40,000 medical providers around the U.S. ditchpaperwork and manage their practices digitally, with cloud-based software and services that do everything frommaintain patient records, communicate with patientselectronically, and most importantly, get paid for theirwork by insurers. In 2012, its revenues were $422 million.

But CEO Jonathan Bush (at right) likes to shake things up,and so in 2011 he hatched a program called “MoreDisruption Please.” Its essence can be captured in aquestion: How could Athenahealth become more valuableto its customers by leveraging the efforts of outside players?MDP is open to entrepreneurs and other establishedhealthcare IT companies, and already, Bush says, 800companies and more than 1500 individuals (such as soloentrepreneurs or consultants) have signed up to be part ofthe community he is creating.

“Half the docs in the country are looking at our screen everyday,” he says. “The idea is that others can sell through to ourclient base through what you might think of as an app store.We’re the backbone.” New apps to help doctors operatemore efficiently or deliver better care would increase theirloyalty to Athenahealth, and the apps’ developers mightintroduce Athenahealth to new customers.

Of course, the biggest issue in getting MDP off the ground,Bush says, was convincing the board that it was worth it to“give up some control, and some addressable market” thatAthenahealth might have captured for itself.

But, says, Bush, “We get paid a percentage of our clients’overall collections, so the less time docs spend onadministrative stuff, the more efficient they become, we dobetter automatically.” And, he adds, “We’ll charge acommission for supporting and servicing products thatcome through MDP.” One example of an early participantin MDP is iTriage, which invites patients to enter theirsymptoms and then tries to help them make an

appointment at an appropriate nearby provider. Bush callsit “OpenTable for healthcare.”

As a start, Athenahealth has created an API (applicationprogramming interface) to give other players the ability totie in to its doctor’s online schedules; about a half-dozenearly partners have been invited to start using it. (Securityand HIPAA-compliance are obviously paramount.) Abouta dozen partners from the MDP program are visible toAthenahealth’s users today on its marketplace; the goal isto have at least 20 up and running by the end of 2013.

Kyle Armbrester is the Athenahealth executive whooversees MDP. The initiative entails sponsoringhackathons at places like MIT and also doing someinvesting in early-stage businesses; a few million dollarshave been set aside for that purpose. Two early investmentsare Vitals, a doctor reviews site, and Castlight Health,which collects information about the cost of variousprocedures. And the company’s search for and support of

How Athenahealth builta “disruptive ecosystem”


disruptive ideas in e-healthcare, Armbrester adds, “willdrive our acquisition strategy.” (In 2012, Athenahealthacquired one of the startups that had been part of MDP:Healthcare Data Services, focused on data analysis forproviders and insurers.)

Armbrester says that two models Athenahealth looks at, interms of companies that have created successful ecosystemsaround them, are Salesforce.com and Apple. “They’vecreated huge value by supporting developers and startupsthat want to plug in to their businesses.”

Athenahealth holds an annual MDP conference in Maine,every October. Bush says that last year it attracted over 200entrepreneurs and executives, and that he expects it toexpand significantly this year.

Bush says that plenty of large, established healthcare ITplayers would prefer to simply sell their own software tocustomers that they imagine they “own.” “Theestablishment profits from closed-ness,” he says. But Bush’sobjective with MDP is to position Athenahealth at thecenter of a new ecosystem of die-hard disrupters —

entrepreneurs and companies helping doctors navigate thechallenging waters of e-healthcare.

From the Athenahealth MDP Web site:

“At athenahealth, we want to make health care workas it should. And we firmly believe that demands amassive surge in disruptive innovation.

“That's why we founded "More DisruptionPlease" (MDP), our innovation and partnershipprogram aimed at like-minded entrepreneurs, healthcare IT companies, investors and thought leaders—anyone who shares our vision of changing the statusquo in health care through openness andconnectivity of disruptive solutions. athenahealth isthe nexus for their entrepreneurship, giving partnersa "go-to-market in a box" via our cloud-based network("athenaNet") and integration into medical providers'workflow. Innovators who become part of ourplatform can achieve immediate scale, bringing thebenefits of their leading-edge services to a broadpopulation of care givers and patients..."


Excerpted from a talk David Butler, VP of Innovation andEntrepreneurship at Coca-Cola, gave in 2013.

Startupsknow how to start, but most struggle with scale. Bigcompanies know how to scale, but don’t know how to start.

Starting is about developing assets. You have no brand, noproduct, no relationships. It’s about rapid learning,exploration, pivoting, being lean.

Scaling is all about leveraging assets, network effects,execution, and planning. Everything is big. At Coke, wethink in millions and billions, not thousands. We have 500brands in our portfolio. Seventeen of those are billion-dollar brands, in terms of annual sales. We’re local in 207countries. The two countries we’re not in? North Korea andCuba.

What if we could make it easier for starters to be scalers andscalers to be starters?

How do you do that? We’re learning by doing, we’re failingall over the place, we’re trying new things.

We learned right away we needed to hire some professionalstarters. So we’ve been hiring co-founders, people who hadstarted startups. Some had failed, some had beensuccessful. We’re launching eight or nine startups withthem in different cities around the world, using the leanstartup process. One of them is an app to help people findjobs. Youth unemployment is a huge problem.

We’re going right into the startup community. Coke has aspace in WeWork San Francisco [a coworking facility], with300 startups all around us.

Coke has all these assets, like a huge fleet. We have morevehicles than DHL, UPS, and FedEx combined. What ifyou could open that up to the startup community, not justour co-founders inside of Coke?

We went to the organizers of Startup Weekend and said,“We don’t want to just write you a check. How can we reallyhelp you?” They told us that we’re the first non-tech

company they’d ever worked with. There’s a wholecommunity of hardware startups, makers, who haven’tbeen given the accessibility to all these new [design andrapid prototyping tools.] We’re sponsoring ten maker-themed Startup Weekends, and we did the first in Augustin Seattle. Our people are also going to Maker Faires to helppeople make stuff, because that’s what we do. InNovember, we’re doing the first Startup Weekend inMyanmar.

What’s the point, not just from the Coke perspective, butfor every other large corporation? If we get into the startupecosystem, we can create more scale, more diversity, andhopefully more revolutions.

We all win when we make it easier for startups to be scalers,and scalers to be starters.

Coke‘s Innovation VP onconnecting with startups


A growing number of companies — from Google to Coca-Cola — are hosting hackathons that invite outsiders to buildsomething related to their businesses. They can supply aninfusion of fresh thinking or new directions for thesponsoring organization; they can be a way to attract talent,or get people energized about participating in a “big vision”;or they can be a way to get people creating things yourcustomers might want, or that might plug into a product orservice that you are planning to offer.

We divide hackathons into two categories: companyhackathons, which bring together employees and perhapsbusiness partners, and community hackathons, which aregeared primarily to participants outside of theorganization. In talking to hackathon organizers, theyemphasize five keys to success:

1. Strong pre-event promotion, using companyresources and outside partners, to ensure thatparticipation meets expectations.

2. Ensuring that the company is clear about what itwants from the hackathon, and that it communicatesclearly about what participants will get out of it(whether or not they win prizes.)

3. Organizing the hackathon space and agenda so thatparticipants can form teams quickly and workefficiently.

4. Being crystal clear about who owns the ideasdeveloped. Typically, this is the participants, but insome cases, prize-winners must agree to grant futuredevelopment rights to their idea to the sponsoringcompany.

5. Making sure employees and in-house experts onrelevant product lines or technology sets are presentat the event, both to learn from what happens, and toprovide their expertise.

Here are five examples of community hackathons heldrecently, at Fortune 500 companies, government agencies,

and non-profits, along with a look at their goals and howthey were run.

1. Hasbro-a-thon

Partnership: Run incollaboration with AngelHack.

Objectives: “The Hasbro-a-thonis a first of its kind toy and gamehack! We’re taking hacking to awhole new level of fun! Hasbrois looking for new ideas for playin their world class portfolio ofbrands and beyond. Build aprototype (“hack”) of something that solves a big problem.It can be an App, Website, Game or, of course, a Toy… youdon’t need a crazy business plan but you need to be able toshow in 3 minutes why your idea will be the next big way toplay.”

Key rules: “Teams have full ownership of everything theybuild at our events and are free to do with it as they wish.”Also: “Have fun. Use whatever languages or hacks you havein your arsenal. Show us hardware. Show us new concepts.Show us anything you’d like.”

Judges: Four Hasbro executives, eight outsiders (primarilyentrepreneurs)

2. Brigham & Women’s Hospital Hackathon

Partnership: Run in collaboration with the H@ckingMedicine group at MIT.

Objectives: “Bring togetherinventive, forward-thinkingminds to change the status quoand create disruptive solutionsin healthcare today…Theultimate result could be thebeginning of the next big health

Hackathons: Five keys tosuccess, real life examples


care transformation. End the weekend with a team, newconnections, and prizes with potential access to BWH’siHub resources, and a hack on its first steps towardsdisrupting healthcare.”

Themes: Participants were asked to focus on one of threethemes: The Patient and Family Experience, ChronicDisease Management in the Outpatient Setting, andModernizing the Practice of Evidence-Based Medicine.

Entry form: Created in Google Docs. Asked questions like“What skills can you bring to a hackathon team?” and“Describe a problem in healthcare you would like to solve?”

Prizes: Presentation and feedback on product at a meetingof the hospital’s innovation team; a review on usabilityfrom hospital experts; an invitation to present at theCareFWD 2013 conference in Boston; a financial award of$1,000. “In addition, the BWH iHub will provide awardeeswith an opportunity to bring their project into the iHub asan innovation pipeline project which may lead tocommercialization or dissemination. This opportunity issubject to the execution of a mutually acceptablecollaborative agreement.”

3. Campbell’s Hack the Kitchen

Objectives: Getting softwaredevelopers to use Campbell’srecipe API (applicationprogramming interface) to createnew apps, games, or web-basedexperiences related to meal-planning.

Themes: None specified.Company said participants had a “blank canvas” to workwith.

Prizes: Grand prize was $25,000, plus a $25,000 contract toget the app ready for release. Runner-up was awarded$10,000.

Judges: Campbell’s chief marketing officer, plus two well-known tech and food blogging personalities.

Winner: Food Mood, which helps users find relevantrecipes based on their mood. Created by Pollinate, aPortland, Oregon digital agency.

Controversy: Some developers didn’t like the idea that

they’d have to submit their idea and have it approved beforebeing given access to Campbell’s API, or that if they werechosen and spent time developing something, they mightnot be guaranteed continued API access.

4. eBay’s Battle of the Bay University Hackathon

Objectives: Recruiting collegestudents, or those who hadgraduated in the prior sixmonths. “We’ll fill you withyummy goodies and challengeyou to build great things on ourplatform. Bonus: An hourly Wii/Xbox/PS3 competition. Get cozyand have 1-1 talks with our developers, product managers,marketing gurus and program leads. And learn more abouteBay and eCommerce innovation! If that excites you, wehave our Career folks on hand so you can even get a jumpstart on internship and job searches!”

Prizes: Cash prizes for first, second, and third place ($2500,$1000, and $500.) Also prizes for most tweets about whata participant is working on, a “WTF Award” for the mostout-there hack, and an eBay internship “based ondemonstrated skill, knowledge and activity during thehackathon.”

5. NASA’s International Space Apps Challenge

Objectives: Engage thousands ofpeople around the world inNASA’s mission, via “masscollaboration.” For the 2013edition, more than 9,000 peopleparticipated in 44 differentcountries.

Themes: NASA offered more than fifty different challengesthat participants could tackle, from visualizing solar flare todesigning miniaturized satellites to collect data about Mars.

Prizes: Recognition, rocket launch invitations, spaceflighttraining, plus local awards offered by local NASAorganizers, including flight suits and 3D printers.


Corporate venture capital has a rotten reputation. Andsome of that is well-earned.

Corporate VC arms come and go, based on the CEO’s orCFO’s whims. The teams often lack experience makinginvestments, and they typically aren’t compensated thesame way “real” VCs are. They may promise entrepreneursthat they will help make introductions to customers, orinitiate collaborations with divisions of their company, thatdon’t come together.

And at times when the enthusiasm about startups is high(remember 1999?), more companies jump into ventureinvesting. We seem to be at one of those moments: in Q2of 2013, the number of active corporate VC investors wasup 40 percent from Q3 of 2011, according to CB Insights.

Nagraj Kashyap, managing director of QualcommVentures, an arm of the San Diego wirelesscommunications company, says that 2013 feels verydifferent than 2000, when his company began makinginvestments. “Balance sheets are healthier for corporates,”he says, “and I think today they’re not expecting to flipcompanies in a year and make lots of money. The mainmotivation for us is that investing in startups is one avenuefor increasing our innovation lens, and that it will be a long-term good for the company.”

So how do you do corporate venture capital right? Wetalked to current and former investors at three of the mostactive corporate venture capital arms — Google, Intel, andQualcomm — to understand where companies go off therails, and how they set things up for success. We also spokewith a former investor at Motorola’s venture capital group,Kurt Estes, who now works with companies to set upventure arms at Sikich Investment Banking, and DaveBalter, who is running a new venture team that is part ofTesco, the world’s second-largest retailer. (See Balter’svideo, above, where he talks about the company’smotivation.)

Their guidance falls into ten categories:

1. Reasons for doing it

“I think there’s an assumption that you can use startups asan extension of your own R&D,” says Lucy McQuilken,who spent nine years as a strategic investment manager atIntel Capital. “That’s a false premise. Corporate investorsneed to think of it more as an ecosystem play: if this set ofcompanies I’m interested in fostering existed, would thatcreate more markets for my products? Are these companiesbuilding something my customers demand that I can’tmake?”

But Kurt Estes, who spent five years at Motorola Ventures,says that making investments in technologies or businessesthat the company isn’t current pursuing internally can giveit a window into how those areas are developing. “You maynot want to invest in something internally, but this is a wayto hedge your bets,” he says.

At Qualcomm Ventures,Kashyap (right) secondsthat: “You obviously dointernal research, but youwant to balance that withyoung entrepreneurs whoare thinking about wherethe next innovations arecoming from. Meeting withstartups is probably the bestway to learn about what’s going to come in the next threeto five years. They’re the ones innovating the most and thefastest.”

Corporate VC can sometimes give the investor“preferential treatment on licensing their product, earlyaccess to it, or maybe the portfolio company is modifyingthe product in a way that benefits you, because you’reworking together to get their product to the marketthrough your channels,” Estes says. It can also be an earlylook at companies that might be future acquisition targets,of course.

Doing corporate VC right:Top 10 recommendations


Access to talent is another solid reason to invest,McQuilken says. “A lot of talent is leaving MBA programsand engineering programs and gravitating to startups, notto big companies. So if you’re going to be in the global talentmarket, you need to pay attention to startups. These areyour future employees,” she says, perhaps via anacquisition.

Google Ventures is unique in that most of its motivation isfinancial return, rather than a strategic fit with any of thecompany’s current businesses. Its portfolio includes coffeeroasters, drug development firms, and makers of biofuels —along with many software and Internet companies.

At Tesco’s dunnhumby division, which began makinginvestments this year, Balter says that “We believe we’redoing this to strategically evolve the business, to help openour eyes to new opportunities.”

2. Composition of the team — andcompensation

It’s hard to transform line-of-business executives into venturecapitalists overnight; the businesstakes years to learn. “Having somepeople who’ve raised money asentrepreneurs, or who have beenpart of a VC firm in the past is prettyimportant,” says McQuilken. And,says Estes, “You can’t take yourM&A folks and expect them to doventure investing. They’re twodifferent things.”

“Doing well in venture depends onhow many good deals you see, andyou don’t get that withoutconnections, and people who have really broad networks,”he adds. That isn’t typically the case with long-timecompany employees who suddenly get assigned to theventure group.

At Qualcomm, a few of the team members had priorventure capital experience, says Kashyap, but he says thatthe majority are newcomers to Qualcomm. “All of themhave technical degrees, and they come from a variety ofindustries,” including management consulting,investment banking, and tech. His group, created in 2000,has almost 30 employees.

Rich Miner of GoogleVentures, right, says thatpeople on the ventureteam need to get somefinancial upside if theirinvestments do well, asopposed to just being paida salary. Otherwise, it’shard to attract top talent.“I do get a salary, but all ofthe upside is based on the success of our portfolio,” he says,noting that his incentives aren’t pegged to the ups or downsof Google’s own stock. “Most strategic investment arms areinvesting for strategic reasons, to help the parentcompany,” Miner says. But the problem there is “theyworry, does this investment impact or threaten an existingbusiness we have. They wind up thinking more about theparent company than building a great portfolio.”

But giving corporate investors thesame kind of profit potential thatoutside VCs have, Estes says, may bepolitically difficult. “No way acompany wants to have a managingpartner of their VC group whomight make more than the CEO,”he says.

3. Sourcing potential deals

Traditional venture capital firmsbuild networks of entrepreneursand “friends of the firm” who helpalert them to promising newcompanies. Large companies, Balterbelieves, can use employees to createthat same kind of radar system.

“We’re getting about one pointer every day to interestingstartups from our employees,” he says. “These are 2000people around the world who have their ears to theground.”

Balter also says that he is creating connections to “everyaccelerator program and incubator, creating relationshipswith venture capital firms and angel investors, and lettingthem know that we want to share deals with them that relateto commerce and the future of retail.”

Qualcomm casts a wide net in looking for potential deals,says Kashyap. “We operate in seven different geographies:the US, Europe, China, India, Israel, Korea, and Brazil. We

“You can‘t takeyour M&A folksand expect themto do ventureinvesting.They‘re two

different things.”


have investment professionals on the ground in all of thoseregions, because they’re strategically important to us.They’re either big markets, or they’re where our customersare, or they are technology hubs. And one thing we can doin those regions when we see innovations that areinteresting is we can pass them along to Qualcommheadquarters,” serving as a sort of supplemental radar, hesays.

4. Due diligence

Venture capital, says Estes, “is fairly lemming-like. Whenthe big name VCs come in, everyone else jumps in, withoutdoing as much due diligence as theyshould. But that doesn’t mean it is ablockbuster idea. You really have todo your own evaluation in avacuum.”

5. Creating exposure andopportunities to learn

Swapping intelligence aboutmarkets, customer needs, andemerging technologies can benefitboth company employees andstartup teams. But it’s “an incrediblychallenging problem” to figure outthe best ways to connect portfoliocompanies to the right people anddivisions of a large company, saysMcQuilken. Not to mention gettime and attention from busy lineexecutives. Intel created quarterlyevents where ten startups wouldoffer demos and answer questionsfor company executives. “Someonewould say, ‘Hey, I could really usethat.’ Then, you get moreengagement from groups within the company. But youwant to do those kinds of events when there’s some senseof what the product is going to be, how it’s going to workand be priced, as opposed to at the earliest stage of thestartup’s life.”

Qualcomm Ventures hosts an annual CEO Summit, whichbrings together founders of its portfolio companies,Qualcomm senior executives, and Qualcomm businesspartners. “We do some matchmaking there,” Kashyap says.The company’s internal IT department also helps tosupport pilot tests of new enterprise-focused technologies

with small groups Qualcomm employees.

Balter says his plan is to bring startup founders intodunnhumby, a customer and data analytics business, for“lunch and learns.” “We’re putting constructs in placewhere individual dunnhumby managers meet one-on-onewith the founder, and start a dialogue. You want to engagefirst, and then find ways to work together.”

6. Acknowledging the politics

In big companies, “there is never an absence of politics,”Estes says, which can sometimes make it tough to invest instartups that seem as if they will compete with an existing

offering, or something new beingdeveloped internally. “You alwayshave cases where a business unit isworried about something that theythink would undercut them in someway,” he says. “Most of the time,we’d position it as a hedging bet” —

the startup might be using adifferent technology, or might befurther along than Motorola — ”butin some cases, it might be a third-railkind of issue, and you had to avoidit.”

7. How the corporation can helpportfolio companies

Promising startups often have theoption of taking money fromnumerous investors. So corporateVC groups need to offer clear andconcrete things that can helpcompanies build momentum intheir market. It could be access toexpensive infrastructure,

introductions to prospective customers, or help gettingpress.

Google Ventures, founded in 2009, may be the mostaggressive in trying to demonstrate how it can helpportfolio companies. There’s a seven-person design studiothat can assist with the design of websites or mobile apps.“They work with our companies to whiteboard ideas,debug problems, create great user interfaces,” says Miner.There’s also a public relations group that helps companiesget ink. “These are people from Twitter and Google whohave helped launch new products and brought companies

Promising startupsoften have theoption of takingmoney from

numerous investors.So corporate VCgroups need tooffer clear and

concrete things thatcan help companiesbuild momentum in

their market.


public,” he says. A team of sourcers help startups fill keyroles. And every week, Google Ventures’ Startup Lab runslive events for its companies, on topics like workspacedesign and goal-setting. There’s also a core technical teamthat both helps Google Ventures conduct due diligence onprospective investments, but can also advise companies on“issues of scaling and security and up-time,” Miner says.

Global corporations can help startups think about enteringnon-US markets in ways that traditional VC firms can’t,says McQuilken (above, right). “Multi-national companiesare uniquely positioned to help startups understandforeign markets, and establish relationships there.”

As a major advertiser, Intel made anintroduction to its ad agency forseveral startups working on newonline advertising technologies.“The agency helped get them infront of Coca-Cola and these otherhuge brands,” McQuilken says.

8. Financial returns matter

While learning about new marketsor helping create an ecosystem arenice reasons to invest, positivefinancial returns are a politicalnecessity for the long-term survivalof a VC initiative. “If you losemoney doing it, it won’t last long,”says McQuilken. “There’s alwayssome part of the organization thatwill say, ‘What are we doing thatfor?’”

Balter acknowledges that “in fiveyears, someone will come with asharp pencil and want to know whatcame out of this.”

9. Using the right yardstick

In the world of traditional venture capital, the limitedpartners who supply the money to VC firms “know thatthere are business cycles,” says McQuilken. “They look atthe funds they have invested in and compare them based onthe year the money was put to work. For a given year, fourpercent mightbe a good return.Corporates need to do that,too — have a way of measuring themselves against otherinvestors in that same timeframe. You can’t beat yourself

up if you’re just in a downbusiness cycle.”

10. Sticking with it

Traditional venture investorsknow it can take a decade ormore for some investments topay off, and many corporateinvesting arms get evaluated —and sometimes killed — well

before that point. Investors who get in and out with upmarkets and down markets don’t tend to do wellfinancially, Miner says, “and the entrepreneurs need

someone who is there for thedistance. A lot of corporate VCsdon’t have the stamina [to support astartup over the long haul], andthat’s where they get a badreputation.”

Many corporations will write acouple checks to startups when theysee an obvious strategic benefit, orthe chance to learn about aninteresting emerging market. Butvery few will create enduringcorporate venture capital groupsthat can help the enterprise learnabout, adjust to, and profit from bigshifts in their industries. “You needsenior management that iscommitted to building a top-tierventure fund, and focused on hiringand retaining the best people,” saysMiner.

Today, the most active corporateventure groups representcompanies in tech, life sciences,healthcare, media, and financial

services. Could that change over time? “I think otherindustries will step up their pace of investing once they seemore change,” says Kashyap. “When you have innovationat a very fast pace in your industry, that creates a goodopportunity for venture investing.”

Do you have corporate venturing lessons to share?Wewant to hear.Contact us at [email protected].

Many corporationswill write a couplechecks to startupswhen they see anobvious strategic

benefit.But few will createenduring corporate

venture capitalgroups that can

help the enterpriseprofit from big shiftsin their industries.


Brad Feld, Venture Capitalist, Foundry Group

Most entrepreneurs fall victimto a phenomenon that hasbeen dubbed “Happy Ears”when they are interacting withlarge companies. They hearwhat they want to hear, whichis usually much moreoptimistic than reality. So Iencourage startup CEOs toassume nothing is going to happen, and to focus onworking together to do something actionable early in therelationship. If you can get some real activity started, thenyou have a chance of something meaningful happening.

Antonio Rodriguez, Venture Capitalist, Matrix Partners;former CTO at HP

Q. How should largecompanies track or interactwith startups?

A. Though the venture folks,whose lives it is to makeconnections. We can take thebrunt of filtering meetings soas to minimize the timewasted by the folks who have the least time to waste: thefounders & entrepreneurs building the future.

Q. What prevents them from doing that... or what do theytend to do to get in their way?

Cycle time & the people tax. There is an RPM between thespeed of a startup and the speed of a big company and thereare good reasons for that. Without a clutch in the middle(like us), it is hard to think on timeframes that matter forboth sides. The people tax is too many big company peoplehaving to be involved in even the smallest deals.

Steve Case, Founder, Revolution Ventures and AOL

“Most large companiesrecognize that they can’t justplay defense. They can’t justbe protecting the status quo.But as companies get larger, itis harder to innovate. Figuringout ways to create a networkaround your company isimportant. It’s why there are85 companies that are part of the MIT Media Lab. Morecompanies are creating venture capital funds — even 7-11.Companies are investing in venture firms, and supportinginitiatives like Startup Weekend. They want to beconnected to the startup community, see ideas a little bitearlier, see opportunities for partnership and acquisition.The world is changing rapidly. Most smart people don’twork for them. The traditional command-and-control,build-it-within model has broken down. Today requires amore of a networked approach, and more collaboration.Otherwise, you run the risk of being left behind.”

“It’s a little like creating an API to plug into your company.How do you create ways to get a sense of what’s happeningout there that might be relevant, and let people know thatyou want to build some connections?”

Jeffrey Bussgang, Venture Capitalist, Flybridge CapitalPartners

Q. Why don’t big companiesengage more with startups?

A. Nobody thinks of it as theirjob. People tend to say, ‘Oh, it’scorporate development’s job tohave startups on their radar.’And if you’re a mid-level exec atone of these big companies, youhave nowhere to even begin —you don’t have a road map, you don’t know how to filter

Venture capital viewpoint:Insights from investors


the non-interesting companies, you don’t have dealflow.

Q. So how do you change that?

A. You can go to venture capitalists in your area, or whoinvest in your industry. If you bring something to thetable where it could help their startups — maybe yourepresent a channel, a partnership opportunity, acustomer opportunity — they are going to want to have arelationship with you, and they’ll make introductions tothe relevant companies they’re seeing.

In addition to venture capital firms, I think innovation-oriented executives should be reading more of thestartup press. Seattle, New York, Boston all have reallygood blogs, publications, and reporters who write aboutwhat’s happening in the startup ecosystem. That’s a goodway to absorb information, to develop a radar.

Andy Palmer, Serial Entrepreneur and Investor, KoaLabs; former global head of software, NovartisInstitutes for Biomedical Research

Q. What percentage of bigcompanies do you thinkknow how to interact withstartups?

A. Less than a quarter. But Ithink it’s getting better. [Asan innovation executive,] ifyou do a good job, youbecome the human API intothe bigger company. You

provide the air cover [for startups who work with you].The best executives have some kind of budget to dopilots for $50,000, $100,000, $200,0000, to get thingsstarted.

Q. What do you make of companies like Disney orKaplan running their own accelerator program forstartups?

A. The risk of selection bias is extreme. The bestentrepreneurs probably don’t need to do any accelerator.The risk of a big company running its own acceleratorand thinking, ‘That’s how we’re going to get our startupmojo,’ — what you end up with are not the bestentrepreneurs, but some second-, third- or god forbidfourth-tier entrepreneurs. An alternative approach mightbe, ‘I’m going to get behind Techstars, and have my topline-of-business managers go to every Techstars event.’Spend a day at each city, reviewing all of their companiesand looking for companies you could engage with. Thelevel of effort required would be radically different thansetting up your own incubator.

Q. Any other advice from your time inside a bigcompany, at Novartis?

A. One thing we would always do when there was a bigtrade show like BioIT World (focused on newinformation technologies related to the biopharmabusiness) was get a hotel suite, and use the opportunityof the show to set up 30 or 40 startup meetings. Justbang ‘em out. Everyone of interest is in town for theevent. And you’re out of the office, so you’re morereceptive. And your sole focus is on learning about whatthese startups are doing, and how you might be able touse what they’re developing or partner with them.

http://innovationleader.com/june2014


Startup Mojo Scorecard1. We have developed “startup sonar” in multiple parts of our business, identifying and tracking thestartup ventures that have the biggest potential to impact us or our customers.

[ ] True

[ ] In process/working on it

[ ] False

2. We are the easiest company in our industry for startups to partner with.

[ ] True


[ ] False

3. Our corporate ventures team is the first stop for startups raising money in our industry.

[ ] True


[ ] False/No corporate ventures team

4. We offer assistance to startups in concrete ways (e.g., mentorship from our employees, anaccelerator program, free office space at headquarters, events that help us both understand industrytrends).

[ ] True


[ ] False

5. Our culture is able to use/sell/distribute products developed by startups, and able to integratestartups that have been acquired.

[ ] True


[ ] False

Startup Mojo Scoring: You’ve attained it when you can answer “True” to at least three of these criteria, and “Inprocess” on at least one other. Being able to answer “True” or “In process” on three criteria means you are well onyour way.

Contents 3 Cultivating Startup Mojo Page 5 Why Time Warner and others use accelerators Page 7 Pros &...

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Transcript of Contents 3 Cultivating Startup Mojo Page 5 Why Time Warner and others use accelerators Page 7 Pros &...