Corporate Venture Capital

14
Compaq Computer Corporate Venture Capital March 3, 2001

description

 

Transcript of Corporate Venture Capital

Page 1: Corporate Venture Capital

Compaq Computer

Corporate Venture Capital

March 3, 2001

Page 2: Corporate Venture Capital

Overview

Corporate venture trends Rationale for corporate venture capital Why Compaq invests How to approach a strategic investor

Page 3: Corporate Venture Capital

Corporate venture capital soars

Corporate Venture Capital

0.37

11

17

0

5

10

15

20

1995 1999 2000 est.

*National Venture Capital Association

$B

Corporate Venture Capital = 1/6 of all VC Dollars

17

83

Corp. VC

Trad'nl VC

*National Venture Capital Association

Total VC$100Bin '2000

YEAR CORPORATE COMPANIES TOTAL ANNUALVENTURE RECEIVING CORPORATEPROGRAMS FUNDS INVESTMENT

1995 45 65 $370M 1999 370 936 $10.8B2000* 385 1635 $15.7B

* Estimate

Corporate Venture Capital growth has surpassed the growth in overall VC spending

Page 4: Corporate Venture Capital

Corporate VC spending

Compaq invested approximately $500M in 2000

Corporate Venture Capital

0

400

800

1200

$M1999

2000

Source: Venture Economics

Page 5: Corporate Venture Capital

Typical corporate venture funds

Corporate venture funds typically only invest with a major VC; Series B or later

Investments meant to supplement or lead global product group strategies Most funds are primarily focused on creating opportunities for their firms

to capitalize on technology developed outside the firm - Financial return is secondary

Most corporate funds are independent - no other limited partners nor investment banking firms

Typical average investments are under $10M

Page 6: Corporate Venture Capital

Factors driving the trend toward corporate venture capital

• Outsourced R&D model (Leverage innovation in startup community)

• $103B US VC spending in 2000 vs. $1.7B Compaq R&D

• Need for speed

• Internet driving rapid, fundamental change (Commerce, Entertainment, Education, Government)

• Quest for knowledge of disruptive technologies/industry trends• Use venture fund as early warning system -Lead product group strategies

• Client cultivator • Squeezing additional value out of relationship with a client

• Securing sell to, through, or with opportunities

• Profit motive - ROI

Page 7: Corporate Venture Capital

Why Compaq Invests

Access to technology – Differentiation– New markets– White space

Compaq as a technology provider

Page 8: Corporate Venture Capital

Making a good impression

Clearly identify the customer’s pain

How you will solve it

What it means for your strategic partner

Know your value proposition to your

customers, investors and strategic partners

Have a dedicated senior person who can build

a trusted relationship with the partner

Page 9: Corporate Venture Capital

When the discussion turns to equity

– Don’t lead with this discussion Let the value of the alliance to your partner set the stage

– Be prepared to discuss why equity makes sense Exclusivity Time - to - Market advantage

Joint product development

– Control Board seat?

– Where could the investment ultimately lead? Merger or acquisition

Page 10: Corporate Venture Capital

What are we seeking?

Something unique, innovative

Technology which will help Compaq serve new or existing

customers; enter new markets; competitive advantage

Products or services that help Compaq differentiate its offerings

Differentiating technologies–Performance, reliability, scalability, availability, cost savings

Wireless technology and applications

Technology to improve the out of box experience for our consumer customers

Page 11: Corporate Venture Capital
Page 12: Corporate Venture Capital

Backup

Page 13: Corporate Venture Capital

Venture capital investment trends

Total venture capital has skyrocketedAverage venture investment also increasing

•Silicon Valley continues to dominate

*Venture capital invested in the US

was $103B in 2000

(2X 1999’s amount)

Venture Capital Investments by Geography

01/01/2000 through 11/07/2000

Geography Investment ($M) % of Investment

Northern CA $28,611.0 31.1%

New York $13,072.6 14.2%

New England $8,607.9 9.4%

Southern CA $7,183.8 7.8%

South East $6,484.2 7.1%

South West $6,138.2 6.7%

Mid Atlantic $5,342.6 5.8%

Rocky Mtn. $4,864.6 5.3%

North West $3,244.7 3.5%

Great Lakes $3,204.1 3.5%

Ohio Valley $2,207.3 2.4%

Great Plains $1,935.5 2.1%

South $948.3 1.0%

Alaska&Hawaii$9.5 0.0%

Totals $91,854.2 100%

Total Venture Capital Invested

0102030405060708090

100

90 91 92 93 94 95 96 97 98 99 00*

$B

Average IT Investment Size

0

5

10

15

20

25

1995 1996 1997 1998 1999 2000*

$M

Source: Venture Economics

Source: Venture Economics

Page 14: Corporate Venture Capital

What does a potential partner need to know about you?

How much of a risk am I taking on this start-up?–Can you clearly describe the company’s business in 3

sentences - “Elevator pitches”–What type of relationship are you seeking?

Co-Marketing, Discount equipment, Customer, technology licensing, Online services aggregation, product integration

–What is the possible sustainable value proposition?–Who are your competitors, customers, partners?–What is your key competitive advantage?–What stage of financing are you in?–What are the firm’s revenues/business model–What is the path to profitability