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In this particular detailed outline explicate corporate venturing in the uk james mawson july 2012.
CORPORATE
VENTURING
IN THE UK
JAMES MAWSON
JULY 2012
www.thersa.org
12
Contents
The RSA and enterprise 3
About the author 4
Executive summary 5
Introduction 7
The record of corporate venturing 9
The state of corporate venturing in the UK 12
What do corporate venturers think of the UK? 14
Creating the right policy environment for corporate venturing 18
Endnotes 22
3
The RSA and enterprise
The RSA’s full name is The Royal Society for the Encouragement of Arts,
Manufactures and Commerce. Since its foundation in 1754, the Society
has ful?lled the mission encapsulated in its name by ofering ?nancial
incentives for business innovation, showcasing new technologies trans-
forming the commercial world and helping to rethink the way business
is done. The RSA is drawing on this history by launching new strands of
work designed to stimulate and support entrepreneurial initiative in the
UK and around the world. Given the scale of the economic challenge we
face, there could be no better time to undertake such work.
As part of this initiative, the RSA will publish a series of papers that
aim to understand how business investment can be encouraged to start
?owing again and, equally importantly, how it can be directed to the most
innovative and productive companies. This is the ?rst of those papers.
The RSA and enterprise
Corporate venturing in the UK 4
About the author
James Mawson was editor of Private Equity News, part of Dow Jones
and The Wall Street Journal in London, for nearly four years until May
2010 when he launched Global Corporate Venturing as an independent
title from his own publishing company. This was followed by the launch
of a second publication, Global University Venturing, in January 2012.
James has also freelanced for a host of national and trade media titles,
including the BBC, Financial Times, Economist, Independent on Sunday,
Sunday Express and Dow Jones Newswires; provided research for Nick
Davies’s book, Flat Earth News; was a foreign correspondent in central
and eastern Europe; and was international editor for FT Business.
5
Executive summary
Executive summary
Corporate venturing has a troubled record. In previous waves, investment
from corporates in third party ?rms has tended to expand considerably
towards the end of the economic cycle. Most recently, many corporations
invested late in the technology bubble of the 1990s and then retreated
from their venture capital initiatives after the dot.com bust.
However, corporate venturing is once again on the rise and attracting
the interest of policymakers as it becomes clear that those companies
which did not sell of or dissolve their venture capital units are out-
performing companies without a minority investment strategy. More
importantly, corporations are aware that an opportunity now exists to
start investment at the beginning of the business cycle rather than the end.
Some have also observed that corporations have learned the lessons
of the past and are now establishing and running their venture units in a
new way, hiring a mixed team of experienced venture capitalists to work
alongside business managers and entrepreneurs while ensuring senior
buy-in within the corporation.
Despite this, the current state of corporate venturing in the UK is
mixed. Corporate venturing is showing itself to be an efective way of
channelling foreign investment into the country and as an approach
which ofers greater diversity and longer timeframes for investments
than the ailing conventional venture capital sector. However, the scale of
corporate venturing in the UK remains modest. Few deals reach the scale
judged to be the most efcient size for venture capital.
The key barriers seem to be access to suitable and high volume deal-
?ow. Some corporations also worry that the regulatory framework may
not be as friendly, and the UK government not as proactive, in its support
for corporate venturing as overseas. It may be that these concerns are as
much about perception as reality since other investors do feel the UK has
much to ofer in terms of high potential entrepreneurs and a regulatory
environment which is, at least, equivalent to other countries. It seems that
challenging perceptions is important but getting strong-deal ?ow in the
right sectors and creating as friendly a regulatory environment for inves-
tors as possible will be vital to attract corporate venturing to the UK.
There are a number of measures policymakers could consider as ways of
strengthening the ecosystem to encourage and support corporate venturing:
Venture connectivity
•
The government should establish a forum designed to encour-
age UK-based executives to consider starting or expanding their
venturing programmes. The forum could undertake a number
of roles including: presenting investor analyses and working
with stock exchanges so the potential of companies with suc-
cessful venturing programmes is understood and recognised;
looking at gaps in the corporate venturing ecosystem and under-
standing how they could be ?lled; mentoring portfolio company
executives and investors; and exploring how the government
Corporate venturing
is showing itself
to be an efective
way of channelling
foreign investment
into the country
Corporate venturing in the UK 6
can create connections between smaller companies looking for
investment and corporate venturing units
Co-investment
•
The European Commission is considering establishing an in-
novative co-investment scheme to aggregate medium-sized
corporations interested in a speci?c sector. Developing a similar
approach in the UK could ofer ?rms a relatively easy entry into
venturing without having to set up a fund of funds to cater for
all parties across multiple sectors. The natural mechanism in
the UK to allow such a development is a variation of the existing
Enterprise Capital Fund.
Fiscal incentives
A series of ?scal measures could be taken to incentivise and remove barri-
ers to corporate venturing.
•
An accelerated ‘qualifying venture investment allowance’ for
corporations would reward or recompense risk-taking by corpo-
rations in UK ventures.
•
The government could also seek to encourage ‘serial venturing’
by changing the capital gains rules so that disposal could be
deferred if pro?ts are reinvested in further qualifying corporate
venturing.
•
For overseas companies investing in UK-based risk assets there
could be a structure to allow them to use ofshore cash with
little UK taxation and the ability to repatriate the money if the
investee sets up a subsidiary in the UK.
•
Corporate venturing could also be put on the same tax level as
independent venture capital funds.
•
To encourage corporations to be limited partners in independent
venture capital funds, corporate limited partners could be as tax
exempt as pension funds and investments and could be classed
as outsourced R&D because of the length of time from commit-
ment to potential returns.
•
There is also a strong argument for restarting the Corporate
Venturing Scheme, wound up by the last government, while al-
lowing a higher proportion of relief against corporation tax than
that scheme provided and for increasing the size of a qualifying
target company from £7 million to £25 million.
7 Introduction
Introduction
Recent years have seen an increase in corporate venturing. This has been
preceded by waves of activity in the 1960s, 1970s, 1980s and 1990s; which
saw increases in corporations starting or massively increasing their mi-
nority investments in third parties at the end of the economic cycle. This
pattern is not surprising. Venture capital as an asset class is pro-cyclical;
more money is invested as the economic cycle reaches the latest stages of
most rapid growth before the downturn and potential recession causes
deal-making to plummet.
Historically, corporations have been even more pro-cyclical than their
independent venture capital peers; the latter have the cushion of ‘blind
pool’, 10-year life funds which give them more ?exibility about when
to make investments. Corporations, however, often fund their venture
investments from the balance sheet with allocations made each year.
Governments have often encouraged this pro-cyclicality by ofering tax
breaks or regulation changes at the tail end of the cycle to try to pull in the
?nal, uncertain stragglers. This included the UK’s Labour administration,
which introduced the Corporate Venturing Scheme in the 2000 Budget.
The tendency to pro-cyclical investment and the losses endured during
the dot.com bust mean most corporations have retreated from corporate
venturing and shut or spun of their incubators and investment teams,
selling their limited partnership commitments to venture capital funds.
However, the idea of corporate venturing has remained alive and more
recently has attracted the interest of policymakers. Countries, including
France, Germany, Israel and the US, have begun to develop a coherent
policy package with the aim of encouraging corporate venturing, includ-
ing new funds to support start-ups.
This is partly because those corporations that retained and re?ned
their venturing policies after the dot.com bust have outperformed their
non-corporate venturing peers by most important metrics, accord-
ing to research by London Business School associate professor Gary
Dushnitsky.
1
This out-performance and its causes have started to be
noticed and rivals have set up new venturing programmes or started
afresh with more speci?c goals and more quali?ed teams.
In addition, the ?nancial crisis that began in summer 2007 has forced
governments, companies and individuals to re-evaluate their reliance on
debt to leverage returns over the past 100 years. This in turn has led them
to look at the role that innovation can play in boosting the equity part of
their balance sheets through ?nding new sources of revenues or cutting
costs to increase margins or pro?tability.
According to the newswire Bloomberg, corporations remain well
capitalised with $1.5 trillion of cash sitting on the biggest European
companies’ balance sheets and a further $2 trillion on those of their US
Corporate venturing in the UK 8
peers.
2
They have the means and desire to turn to corporate venturing
as part of a more open model for developing innovation. By contrast,
the pool of alternative long-term institutional investors funding venture
capital ?rms set up after 1945 has started to collapse with the retirement
of the baby boomer generation and the systemic failings in the broader
?nancial services industry to allocate capital efectively, favouring instead
the generation of pro?t through fees.
In addition, the consequences of having about 3 billion people –
efectively the BRICs (Brazil, Russia, India and China) – join the broadly
capitalist economy with few restrictions on capital controls has opened up
near exponential opportunities to ?nd entrepreneurs with disruptive ideas
or business models. This has created competitive pressures unseen since
before the First World War.
Finally, the number of potential and actual entrepreneurs is accelerat-
ing as the cost of basic technology in a number of industries is falling
rapidly, leaving the challenge one of scaling up and distribution through
corporations’ established sales and marketing eforts.
Given the problems encountered during previous waves of corporate
venturing, it is inevitably risky to suggest that this time it is diferent but it
seems that, under current circumstances, it may be justi?ed. For the ?rst
time, corporate venturing has started to gain traction both for companies
and entrepreneurs at the start of the economic cycle. For governments,
implementing the right policies now could prove critical to boosting
their employment rates and gross domestic product, and in gaining
competitive advantage.
Cadbury’s likes taste of success
The chance to take your ideas into the mainstream and encourage fairer
practices is one of the ways whereby the partnership between large,
established corporations and nascent businesses can be aided through
corporate venturing.
For organic chocolate maker Green & Black’s (G&B), whose Maya Gold
chocolate was the ?rst Fairtrade product to go on sale in the UK in 1994,
that chance came in 2002 when the UK’s largest chocolate maker, then
called Cadbury Schweppes before its acquisition by Kraft Foods, acquired
5 per cent. Three years later, Cadbury bought G&B outright.
While some at the time of the 2005 acquisition worried Cadbury would
reverse G&B’s organic and ethical stance on buying chocolate from Belize
farmers at a set amount, Cadbury later rolled out the Fairtrade logo across
its broader range of chocolate. This was a turnabout, as even the year
before Cadbury had repeated its opposition to the principle of ?xing the
prices it paid to cocoa farmers.
9 The record of corporate venturing
The record of
corporate venturing
The history of corporate venturing, as with venture capital more
broadly, is dominated by the US and there are few data points on the
global perspective until the last decade. In the 1960s and early 1970s,
a quarter of Fortune 500 ?rms had a corporate venturing programme,
with industrial groups 3M and DuPont, in particular, popularising
corporate venturing from the late 1960s onwards. These programmes
were largely wound down in 1974 and 1975 due to the oil shock and
ensuing recession.
The second wave began in the early 1980s after the US and UK econo-
mies emerged from 1970s stag?ation and the early impact of Reagan and
Thatcher tax and monetary policy. This wave was fuelled by the growth
of the computer and electronics sectors, peaked in about 1985 – with 100
corporate venturers investing just under $1 billion – and came to an end
in the late 1980s, again because of recession.
The third wave began during the 1990s technology boom, in particu-
lar after the internet services provider Netscape was ?oated on the market
in 1995. It peaked in 2000 before falling steeply to the middle of the past
decade. This wave was driven by a combination of new technologies –
internet, microprocessors, telecommunications and biotechnology – and
a bubble economy that made it seemingly possible to make quick returns
by investing in new technologies.
As a result, from relatively low beginnings in the early 1990s, an
estimated 350 corporate venturers invested $16 billion in 2000 in the
US – 500 invested more than $22 billion globally – making up about 16
per cent of all venture capital investment that year (see Figure 1). The dot.
com implosion in 2001 wiped out previously booked earnings and many
investments, causing corporate venturers rapidly to retreat. By the ?rst
half of 2007 in the US, corporate venturers invested only $1.3 billion: 8
per cent of total venture capital invested.
an estimated 350
corporate venturers
invested
$16
billion
in 2000 in the US
Corporate venturing in the UK 10
Figure 1: The share of US venture capital dollars accounted for by
corporate venture capitalists, 1995–2009 (see appendix for further
?gures)
0
8
6
4
2
10
12
14
16
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995
Source: Created by BusinessWeek from data collected by the PricewaterhouseCoopers/
National Venture Capital Association MoneyTree Report and Thomson Reuters.
In the UK and Europe, corporate venturing has tended to follow the US
experience. Professor Julian Birkinshaw has estimated that just before
the dot.com implosion three-quarters of FTSE 100 ?rms had a corporate
venturing unit.
3
A European Commission survey published in 2000, estimated direct
corporate investments totalling €1.2 billion per year by about 84 compa-
nies.
4
This money went to about 500 companies between 1995 and 1999
and represented 10 per cent of total European venture capital and 40 per
cent of early-stage investing. However, by 2006 the European Private
Equity and Venture Capital Association (EVCA) found that only €322
million was invested by corporations in about 175 deals.
Some have argued that corporate venturing’s decline after the dot.
com boom may not be simply a cyclical efect but also relates to inherent
weaknesses in the corporate venturing model. Birkinshaw, writing with
Andrew Campbell from Ashridge, has argued: “Almost all units set up
to create new opportunities for a company fail to develop any signi?cant
new businesses.”
5
Birkinshaw and Campbell identi?ed three main rea-
sons: early-stage venturing is very hard to do successfully; corporate ven-
turers have no particular advantage over independent venture capitalists;
and the new ventures that do start up within a corporate venturing unit
often attract little attention or commitment from the core of the company.
As a result, Birkinshaw concluded:
“These obstacles to corporate venturing appear to be insurmountable. In
our research, we could ?nd no examples of new legs being developed from
a venturing unit that passed the test of being ‘signi?cant, permanent new
businesses’, meaning they are pro?table, are part of the parent company’s
portfolio and amount to 20 per cent of sales or $1 billion in value. Even
when the research was extended back to venturing units set up in the 1970s
or 1980s, none of them spawned a new business that passed our signi?-
11 The record of corporate venturing
cance and permanence tests. Corporate venturing units do not, it appears,
deliver growth.”
And yet corporate venturing is on the rise again. Last year, more than
550 corporate venturing units from around the world agreed more than
1,100 deals, including exits, as part of broader consortia investing over
$26 billion.
6
It appears that the lessons of the past have been taken on by
the survivors of the dot.com bubble and new entrants through hiring a
mixed team of experienced venture capitalists to work alongside business
managers and entrepreneurs while ensuring senior buy-in. Dushnitsky’s
work at the London Business School over the past decade shows how the
average life of a corporate venturing unit now surpasses the average chief
executive’s job tenure and that venturing units often have advisory boards
made up of senior representatives of business units and report to the
executive board.
7
Dushnitsky argued that companies with corporate venturing units
outperform peers without a minority investment strategy; both by a com-
pany’s market-to-book-value ratio and its innovation capacity, as judged
by patents. He found that between 1987 and 2009, 602 of a sampled 5,313
corporations engaged in venturing and concluded: “Companies with
corporate venturing units outperform peers in similar ?elds judged by
patenting output and using a market-to-book-value ratio.”
8
Indeed, over
the past decade there have been a number of examples where companies,
such as Nestlé, Intel and Cisco, have efectively created large business
lines through their minority investment strategies.
Corporate venturing in the UK 12
The state of corporate
venturing in the UK
Data and information provider Global Corporate Venturing tracks 37
UK-based corporations with a venturing programme.
9
In 2011 this in-
cluded four launches of new corporate venturing units – advertising ?rm
BBH, industrial group Marshall, ?nancial services ?rm Icap and media
group BBC. Established corporate venturing unit SR One, from drugs
company GlaxoSmithKline, also set up a dedicated UK fund.
Of the 55 corporate venturing deals in the UK last year (excluding four
trade exits, one ?otation and one merger and acquisition)16 were in the
healthcare sector, followed in order of popularity by IT, media, services
and clean-tech.
10
Although more than a third of deals were for portfolio
companies at undisclosed stages of development, 13 of those that did
reveal their maturity were in the seed or series A round. This is notable
because the European Venture Capital Association says there are fewer
than ?ve venture capital (VC) ?rms operating at this stage across the
whole of Europe. This means corporate venturing units can be comple-
mentary to the entrepreneurial ecosystem by going into areas from which
VCs appear to be shying away.
In addition, Global Corporate Venturing tracks 24 corporate ventur-
ing units sponsored by foreign corporations with staf in the UK. These
foreign corporations cover the main sectors from health, industrial and
?nancial services, to media and technology, re?ecting the breadth of the
UK’s economy.
Of the 61 investments and exits in the UK last year, 38 involved a cor-
porate venturing unit with overseas parent as part of the deal syndicate.
11
As such, corporate venturing has become an important way for foreign
direct investment to arrive in the UK and a signi?cant way for venture-
backed companies to ?nd an overseas buyer. Last year, for example,
South Korea-based Samsung acquired venture-backed technology com-
pany Liquavista for about £32 million ($50 million) after Samsung had
established a European corporate venturing ofce in the UK.
The UK also appears to be doing well with regard to the number
of corporate venturing units present in the country when compared to
economies of a similar size. So while the UK has 37 active corporate ven-
turing units from local parents, Germany has 31, France has 29 and Italy
eight, according to Global Corporate Venturing’s data. There are slightly
more deals done in Germany than France (from local and overseas-based
corporate venturing units) with 39 and 14 completed last year in the two
countries, respectively, and none in Italy. The UK is well in the lead in this
regard with 55 deals completed last year.
The UK also
appears to be doing
well with regard
to the number of
corporate venturing
units present in
the country when
compared to
economies of a
similar size
13 The state of corporate venturing in the UK
It is important that these signs of corporate venturing success in the
UK continue not least because conventional venture capital is looking less
than healthy in the UK. There were 314 venture capital deals in the UK
last year, with $1.6 billion invested. This was down 32 per cent from 2010.
Private equity ?rms made up the majority of deal-?ow, involved in 235
deals worth an aggregate $1 billion, down 41 per cent from 2010 ?gures.
12
The UK still leads European venture capital,
13
however, it is being rapidly
overtaken by other, emerging markets, such as China, which poured $9
billion into 976 deals last year; up 50 per cent and 16 per cent by value and
volume respectively.
Business Insider looked at internet companies expected to be worth
more than $1 billion in 2011. Only one UK venture capital fund has
backed more than one of the top 24 deals, even though ?ve of them have
UK roots.
14
By comparison, US-based venture capital funds have backed
twelve between them. Switzerland-based funds have backed seven,
Russia’s DST two and France’s Idinvest two.
By being drawn from all sectors of the economy and with often strate-
gic rather than purely ?nancial reasons for investing, corporate venturing
units can diversify their venture investment from a narrow focus on
certain sectors and those companies only able to ofer returns over the
shortest time period.
Rahu ?nds right chemistry for Unilever
The hardest area for corporate venturing to help its parent with is regarded
as the spin-out and successful development of intellectual property. The
achievement, therefore, of Anglo-Dutch-listed consumer goods conglom-
erate Unilever in selling one of its corporate venturing unit’s portfolio com-
panies to OM Group, a New York-listed coatings provider, is impressive.
OM bought Rahu Catalytics, which provides materials for environmen-
tally friendly coatings, composites and inks, from Unilever Ventures (UV)
and the company’s management. A source close to the deal said the price
tag was about £35m ($50m).
Rahu was founded in early 2006 as a spin-out from Unilever Ventures,
which incubates ideas and takes minority equity stakes in UK entrepre-
neurs and is managed by co-founders Paul Smith and Dermott Hill. John
Coombs, managing director of UV and non-executive chairman of Rahu,
said: “It has been a very successful spin-out for us of [intellectual property]
developed in the Unilever [research and development] labs originally for
washing powder.”
Since early 2009, Rahu has operated under an exclusive commercial
agreement with OM Group with regards to its Borchi Oxy-Coat
product line.
Corporate venturing in the UK 14
What do corporate
venturers think of
the UK?
While these developments are encouraging, interviews conducted with
some leading corporate venturers for this paper suggest that the UK’s
position is far from secure and has yet to operate at its full potential.
For indications of how fragile the UK’s place as a venture and innova-
tion hub is, the warning from one London-based head of a US-listed
corporation’s venturing unit (who wanted to remain anonymous) was
salutary. The venture head stated his unit was moving to Paris as “France
has more innovation and now has critical mass and deal-?ow” compared
with a decade earlier. His company had set up its corporate venturing in
the UK because it had facilities in Britain which was then the undisputed
hub of venture capital but times had changed.
Unfortunately, such stories are not rare. Since 2000, a number of
other corporations have closed their UK corporate venturing bases.
This includes medical company Johnson & Johnson and publisher
International Data Group (IDG). As Patrick McGovern, founder of IDG,
which manages $6.8 billion in corporate venturing assets, said:
“In 2000, IDG Ventures did have a fund and operating team of general
partners in the UK. Unfortunately, we found that the expected [return on
investment] of the fund, which was higher than average for venture funds
based in the UK, was not as high as the returns we were receiving from our
venture funds in the US and Asia. We decided to sell the venture team and
its operations to a prominent private equity fund in the UK.”
15
Attracting new corporate venturing units to the UK may also be
challenging. While Georg Schwegler, managing director of Deutsche
Telekom’s T-Venture unit, disputes the claim that there is a lack of deal-
?ow in the UK, he has no plans to establish a unit in Britain. He stated:
“On the portfolio side, UK law gives us lots of burdens when it comes to
statutes and shareholder agreements. Closing local contracts is expensive.”
The global competition to attract corporate venturing is intensifying.
Advisers to the US, Israeli and German governments are now actively
looking at changing their policies to encourage corporate venturing. In
particular, France has seen some of the most interesting developments.
Broadly, its national policy until the late 1990s was about creating
15
‘national champions’ out of large enterprises and later trying to use tax
incentives to encourage angel and venture funding for entrepreneurs.
Most recently, there have been eforts to bring large corporations together
into venture funds to support speci?c parts of the French economy and
complement its tax breaks for angel investors.
In the past year, these funds have included telecoms group France
Télécom-Orange and communications company Publicis Groupe jointly
committing €150 million to a venture fund to back entrepreneurs setting
up digital companies in France and the European Union. In addition,
state-owned rail company SNCF, oil major Total, France Télécom-
Orange and car maker PSA Peugeot Citroën founded Ecomobilité
Ventures to invest €30 million ($40 million) in sustainable transport
start-ups. Meanwhile, Aster Capital, a France-based venture capital
?rm formed by the merger of the corporate venturing units of engineer-
ing companies Alstom and Schneider Electric, had its size and reach
enhanced when it was joined by the chemicals company Rhodia.
As Martin Kelly, a partner of computer group IBM’s corporate ventur-
ing unit and part of the Innovation Fund Ireland’s board, stated:
“The most important considerations are availability of opportunities, not
tax breaks. So, for me, it is about access to great deal-?ow – teams, intel-
lectual property and so on – and an active community – start-ups, corpo-
rates, legal, media and so on. I also think in terms of cities not countries.
So the question for me is more London versus Dublin versus Berlin versus
New York than UK versus Ireland. I think we will see more alignment
around speci?c themes for innovation and so it is important that cities
pick those sectors and themes where they have a potential to capture a
unique global position.”
16
This is precisely the aim of the French approach.
This ?ts with the rationale behind new corporate venturing units’
location decisions. One group said as its focus was material science and
technology, it made a decision to locate in the heart of Silicon Valley,
California, although it had a UK-based parent. The unit head, who
wanted to remain anonymous, said:
“We recognised there would be a critical mass of resources and expertise
in this area uniquely suited to our requirements for partnering and other
relevant resources. We did not look at this on a country basis, such as the
US versus the UK. Rather we speci?cally chose Silicon Valley.”
Despite these challenges, the UK still has strengths to which the right
policy framework could play. Peter Cowley, head of Cambridge-based indus-
trials company Marshall’s corporate angel fund, Martlet, said for this paper:
“In my view – having spent ?ve years in Germany, albeit a while ago – the
UK is up with the US in terms of commercial innovative mindset and
support structures. London is crucially important: its size, its educational
establishments, the UK being in the top 20 of countries worldwide (by
some measures), the professional and altruistic support infrastructure. In
a word, London has maturity.”
17
What do corporate venturers think of the UK?
The global
competition to
attract corporate
venturing is
intensifying
Corporate venturing in the UK 16
Martin Grieve, head of consumer goods company Unilever’s corporate
venturing unit, added:
“The UK is a good place as it has a strong VC community, you can ?nd a
large population of skilled entrepreneurial people and the governance and
regulation are at US standards.”
18
Jon Lauckner, head of car maker General Motors’ ventures unit said:
“GM, through our Vauxhall operations has a presence in the UK, so it
made sense to have Jerneja (investment manager Jerneja Loncar) work
from Milbrook. We decided to make the move last year to get better
access on the start-up and VC activity in the UK and provide access to
other major European markets. Time and distance are key advantages as
compared with doing this remotely from the US.”
19
Mike Brown, a partner in US-based media company AOL’s venturing
unit, which has hired a UK-based senior adviser to help the fund build a
presence in EU, said:
“As a US fund with a global mandate and parent company that has
interests in Europe, we felt the UK was the best area of expansion for
us. Having been to many emerging countries, we felt the proximity [to
the US, Middle East, India and China], ecosystem and entrepreneurial
talent and quality was best in class relative to where we want to take
AOL Ventures.”
20
So the UK has a particular USP as a route into Europe and other
markets. Georg Shwegler of Deutsche Telekom’s T-Venture agreed but
sounded a note of caution: “The UK is typically a good cornerstone
for companies if they intend to go to Europe. However, we feel this is
changing and in the mid-term perspective continental sales people are
inevitable.”
21
Investors clearly have a mixed view of the UK as a location to grow
corporate venturing. Some feel indigenous entrepreneurial talent, the
vibrant London economy and access to Europe and the wider world make
the UK highly attractive. Others are far more sceptical.
This ambivalent perspective is re?ected in a study by Switzerland-
based venture capitalist Verve Capital Partners’ study of the perceived
attractiveness of a country for venture capital ?rms which shows the UK
performs relatively poorly.
22
Although the UK and Ireland have about
$39 of venture capital invested per person – this is above the European
average of $35 – Verve concluded that this was: “notably lower than their
attractiveness rating would suggest.”
In a similar vein, a study by Stefen Wagner and Lucas Laib added:
“The UK is commonly perceived to be one of the leading VC spots in
Europe [but] this counter-intuitive ?nding might have to do with their
centralistic economies focused on its large capitals. While especially
London remains a leading VC breeding ground, peripheral regions and
populations de?ate the actual ?gures of VC spent per capita. There have
17 What do corporate venturers think of the UK?
been attempts to arti?cially create start-up hubs in the periphery, but
more time might be needed for these initiatives to bear fruit.”
23
If corporate venturing is to deliver the growth and jobs in the UK
which it could then clearly this ambivalence must be addressed. Getting
strong deal-?ow in the right sectors is crucial as is creating a friendly
environment for investors when other countries, such as France, are
already vigorously pursuing programmes designed to encourage corpo-
rate venturing in their own economies. Otherwise the risk will be that
reality comes to match the more negative perceptions expressed above.
Amazon gives strong reviews to Love?lm
When Nasdaq-listed online retailer Amazon bought out the remainder of
the shares in UK-based movie rental company Love?lm for an undisclosed
amount in January last year, the companies said there would be develop-
ments but no immediate change to the logo or service terms.
Since then, Love?lm has continued to expand from a ?lm rental service
by post towards an internet-streaming media distributor with more than
two million members of its Love?lm Instant service. In January this year,
Love?lm said it was working with global electronics company LG to bring
Love?lm’s video streaming service to the Korean chaebol’s smart TV
platform. Love?lm has also signed up distribution deals with a number of
major content producers, such as Disney, ITV and BBC Worldwide, and
expanded into Germany.
For Amazon, the continued growth and maintenance of Love?lm’s
senior management represents a successful integration aided by the close
working relationship formed between the two companies through owning
equity. It also represents a turnaround from its previous effort to expand in
Europe’s ?lm rental market.
At the time of the acquisition, Greg Greeley, Amazon’s vice-president of
European retail, said: “Love?lm and Amazon have enjoyed a strong working
relationship since Love?lm acquired Amazon Europe’s DVD rental business
in 2008, and we look forward to a productive and innovative future.”
News provider Wall Street Journal said Amazon valued Love?lm at about
$320m but the cost was offset by its 42 per cent holding. While Amazon
reduced its cost of acquisition through its corporate venturing share
ownership, for Love?lm’s others investors, including venture capital ?rms
Index Ventures, DFJ Esprit and Balderton Capital, which came together
after the 2006 merger of Video Island and Screen Select and rebranding
as Love?lm, the exit was one of the largest of the year.
Corporate venturing in the UK 18
Creating the right
policy environment for
corporate venturing
There are a number of measures policymakers could consider as ways of
strengthening the ecosystem to encourage and support corporate ventur-
ing without having unintended consequences or trying to predict future
winners. These measures have been divided below into three broad areas:
venture connectivity, co-investment and ?scal incentives. The challenge
for all the recommendations will be further work to devise efective ways
to measure progress and efcacy without creating cost or operational bar-
riers. Modelling for unintended consequences and cost/bene?ts will also
be required.
In terms of order of priority, measures to aid venture connectivity
will help develop the demand and capital supply-side conditions which,
if efective, could then create the policy space and justi?cation for the
proposed co-investment approaches and the ?scal reforms.
Venture connectivity
The European Union’s 2000 report on corporate venturing identi?ed
opposition within corporations as a key barrier to establishing corporate
venturing units. As the report stated:
The most common reason for a corporation not to engage in corporate
venture capital is an unwillingness to divert management time from core
activities, linked with the feeling that it is irrelevant or not strategical-
ly useful.
In addition, a 1999 Confederation of British Industry (CBI) report
argued that peer pressure and education could help encourage greater
corporate venturing through initiatives designed to produce publications,
mentoring, networking or personnel transfer across industries along with
practical support to entrepreneurs through afordable expert advice,
perhaps part subsidised.
24
Such an approach would also help challenge
some of the negative perceptions corporate decision makers have of the
UK environment.
It would be bene?cial, therefore, for the government to establish a
forum designed to encourage UK-based executives to consider start-
ing or expanding their venturing programmes. This forum should also
be part of an advisory board structure on venture capital for govern-
ment – as used in Australia through work developed by the Bell Mason
19 Creating the right policy environment for corporate venturing
Group – so corporate venturing is part of the discussion on the wider
venture ecosystem.
The forum could undertake a number of roles including:
•
Presenting investor analyses and working with stock exchanges
so the potential of companies with successful venturing pro-
grammes is understood and recognised.
•
Looking at gaps in the corporate venturing ecosystem and un-
derstanding how they could be ?lled.
•
Mentoring portfolio company executives and investors.
•
Exploring how the government can create connections between
smaller companies looking for investment and corporate ven-
turing units. It is notable, for example, that the government is
a potential source of rich market intelligence resulting from its
extensive procurement activity.
Co-investment
The European Commission, via the European Investment Fund and other
planned mechanisms being created as part of its 2014 Innovation Plan, is
considering how to help corporate venturing. This includes an innovative
co-investment scheme to aggregate medium-sized corporations interested
in a speci?c sector. Developing a similar approach in the UK could ofer
?rms a relatively easy entry into venturing without having to set up a
fund of funds to cater for all parties across multiple sectors. The natural
mechanism in the UK to allow such a development is a variation of the
existing Enterprise Capital Fund.
In a similar vein, it is noteworthy that Wales and Northern Ireland
have introduced policies that mean that up to 75 per cent of venture
money is matched with public funds. This has encouraged corporate
venturing units to invest in those regions.
The challenge of any co-investment model backed by public funds will
be to ensure high performance. For example, it is notable that regional
venture funds supported by the state have tended to underperform on
returns. A 2009 study found government-backed funds had created
1,407 jobs in total, giving an average of just 1.8 jobs per company backed
between 1995 and 2008. The increase in pro?ts at these ?rms was also
found to be ‘modest’. The report also argued that regional funds have a
limited impact on start-ups.
25
Fiscal incentives
The EU report also concluded that the main obstacle to increased corpo-
rate venturing are levels of taxation. In particular, the report claimed that
the rates of capital gains tax and complicated tax regimes discouraged
equity investment.
26
A series of measures could be taken to incentivise
and remove barriers to corporate venturing.
•
An accelerated ‘qualifying venture investment allowance’
for corporations – 100 per cent in the ?rst year – which can
be thought of as analogous to the old accelerated capital al-
lowances but for a world where physical capital matters less,
would reward or recompense risk-taking by corporations in UK
ventures. If the ownership of those assets was ultimately not in
the UK then if a programme of investments overall generated
A 2009 study found
government-backed
funds had created
1,407
jobs in total
Corporate venturing in the UK 20
positive returns on realisation, the realisation would in efect
repatriate funds.
•
The government could also seek to encourage ‘serial venturing’ by
changing the capital gains rules so that disposal could be deferred
if pro?ts are reinvested in further qualifying corporate ventur-
ing. For the balance of any losses incurred, either through sale or
winding up, there may also need to be a relief made available.
•
For overseas companies investing in UK-based risk assets there
could be a structure to allow them to use ofshore cash with
little UK taxation and the ability to repatriate the money if the
investee sets up a subsidiary in the UK. The challenge with this
policy is it is contrary to the direction of travel by HM Treasury
that is trying to make inward investing more equal with UK-
based investors.
•
Corporate venturing could also be put on the same tax level as
independent venture capital funds. As one head of corporate
venturing said: “We are in competition internally over use of
cash so anything that makes us more efcient is good.”
•
To encourage corporations to be limited partners in independent
venture capital funds, corporate limited partners could be as tax
exempt as pension funds and investments and could be classed
as outsourced R&D because of the length of time from commit-
ment to potential returns.
•
As was mentioned previously, attempts to incentivise corporate
venturing were made by the UK in 2000 with its Corporate Ven-
turing Scheme (CVS). This was poorly timed, as corporations
were looking to shut rather than open schemes coinciding, as it
did, with the end of the economic cycle.
According to HM Revenue & Customs (HMRC), 74 companies were
raising £18 million from 256 investing companies using the CVS in its ?rst
year of operation. The amount fell gradually to a nadir of £8 million in
2006–07, before climbing in its ?nal three years both by aggregate value
and volume of investor companies before the scheme was wound up. The
number of investee companies held broadly steady. During its 10 years of
operation £132 million was invested in just fewer than 600 small com-
panies. A parliamentary select committee inquiry welcomed the overall
direction of the legislation but criticised the scheme for having “a lot of
very ?ddly little restrictions”.
The CVS scheme allowed: investment relief against corporation tax of
20 per cent of the amount subscribed for full-risk ordinary shares; defer-
ral relief from tax when the shares were sold and the funds reinvested;
and relief against income if shares were sold at a loss. The shares would
have to be held for at least three years to gain full tax credit.
Given the context set out above, there is a strong argument for restart-
ing the CVS and allowing a higher proportion of relief against corpora-
tion tax – between 30 per cent and 50 per cent – and for increasing the
size of a qualifying target company from £7 million to £25 million as that
re?ects the usual upper limit of an investment in a deal from an average-
sized venture fund. It will, of course, be necessary to ensure that any
such scheme is not burdened by the restrictions identi?ed by the select
21 Creating the right policy environment for corporate venturing
committee. As the government is currently operating in a period of severe
?scal constraint, the introduction of such a scheme would only be likely
when it was clear that less expensive measures such as encouraging ven-
ture connectivity and co-investment had created enough of a momentum
behind corporate venturing to ensure that the CVS was both cost efective
and bene?cial to the wider economy.
Corporate venturing has a clear role to play in growing parent ?rms,
start-ups and medium sized enterprises. It can encourage inward invest-
ment, boost jobs and, ultimately, GDP. US companies, such as Intel
Capital and International Data Group, have created multi-billion dollar
asset management units able to invest around the world and help their
core businesses and entrepreneurs.
However, a growth in corporate venturing will not happen in the UK
by accident. The UK needs to provide the right conditions to encourage
talented investors and entrepreneurs and larger business to come to the UK
as a welcoming shore where value can be added and exported across the
globe. In designing and balancing new ?scal and regulatory rules, we must
create a playing ?eld on which corporate venturing can compete and win .
Corporate venturing in the UK 22
Endnotes
1. Keynote presentation by Gary Dushnitsky, Associate Professor, London Busi-
ness School, at the Global Corporate Venturing Symposium in May 2011.
2. Bloomberg data in Denver Post, January 2012.www.denverpost.com/business/
ci_19831812
3. Professor Julian Birkinshaw, deputy dean of London Business School
4. Bannock Consulting Ltd, Corporate venturing in Europe, study for the Euro-
pean Commission DGXIII EIMS 98/176, (1999)
5. Julian Birkinshaw and Andrew Cooper: Know the Limits of Corporate Ventur-
ing, Financial Times 2004 www.ashridge.org.uk/Website/IC.nsf/wFARATT/Kn
ow+Te+Limits+of+Corporate+Venturing/$fle/KnowLimits.pdf
6. Global Corporate Venturing 2012 data exclusive for report
7. Gary Dushnitsky, Associate Professor, London Business School
8. Ibid.
9. Global Corporate Venturing op. cit.
10. Global Corporate Venturing op. cit.
11. Global Corporate Venturing op. cit.
12. Ibid.
13. Dow Jones VentureSource data for report, 2012
14. Business Insider, 2011 www.businessinsider.com/most-valuable-startups-eu-
rope-2011-12?op=1
15. Patrick McGovern, founder of IDG
16. Martin Kelly, partner, IBM
17. Peter Cowley, head of corporate angel fund, Martlet
18. Martin Grieve, head of corporate venturing unit, Unilever
19. Jon Lauckner, head of ventures unit, General Motors
20. Mike Brown, partner in venturing unit, AOL
21. Georg Schwegler, T-Venture
22. Verve Capital Partners, 2011. www.investiere.ch/blog/theory-vs-reality-ven-
ture-capital-europe
23. Ibid.
24. CBI, Connecting Companies, Using Corporate Venturing for Growth; No-
vember 1999
23 Endnotes
25. From Funding Gaps to Thin Markets: UK Government Support for Early
Stage Venture Capital, British Private Equity and Venture Capital Association,
September 2009
26. Bannock, op. cit.
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Copyright © RSA 2012
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doc_898692929.pdf
In this particular detailed outline explicate corporate venturing in the uk james mawson july 2012.
CORPORATE
VENTURING
IN THE UK
JAMES MAWSON
JULY 2012
www.thersa.org
12
Contents
The RSA and enterprise 3
About the author 4
Executive summary 5
Introduction 7
The record of corporate venturing 9
The state of corporate venturing in the UK 12
What do corporate venturers think of the UK? 14
Creating the right policy environment for corporate venturing 18
Endnotes 22
3
The RSA and enterprise
The RSA’s full name is The Royal Society for the Encouragement of Arts,
Manufactures and Commerce. Since its foundation in 1754, the Society
has ful?lled the mission encapsulated in its name by ofering ?nancial
incentives for business innovation, showcasing new technologies trans-
forming the commercial world and helping to rethink the way business
is done. The RSA is drawing on this history by launching new strands of
work designed to stimulate and support entrepreneurial initiative in the
UK and around the world. Given the scale of the economic challenge we
face, there could be no better time to undertake such work.
As part of this initiative, the RSA will publish a series of papers that
aim to understand how business investment can be encouraged to start
?owing again and, equally importantly, how it can be directed to the most
innovative and productive companies. This is the ?rst of those papers.
The RSA and enterprise
Corporate venturing in the UK 4
About the author
James Mawson was editor of Private Equity News, part of Dow Jones
and The Wall Street Journal in London, for nearly four years until May
2010 when he launched Global Corporate Venturing as an independent
title from his own publishing company. This was followed by the launch
of a second publication, Global University Venturing, in January 2012.
James has also freelanced for a host of national and trade media titles,
including the BBC, Financial Times, Economist, Independent on Sunday,
Sunday Express and Dow Jones Newswires; provided research for Nick
Davies’s book, Flat Earth News; was a foreign correspondent in central
and eastern Europe; and was international editor for FT Business.
5
Executive summary
Executive summary
Corporate venturing has a troubled record. In previous waves, investment
from corporates in third party ?rms has tended to expand considerably
towards the end of the economic cycle. Most recently, many corporations
invested late in the technology bubble of the 1990s and then retreated
from their venture capital initiatives after the dot.com bust.
However, corporate venturing is once again on the rise and attracting
the interest of policymakers as it becomes clear that those companies
which did not sell of or dissolve their venture capital units are out-
performing companies without a minority investment strategy. More
importantly, corporations are aware that an opportunity now exists to
start investment at the beginning of the business cycle rather than the end.
Some have also observed that corporations have learned the lessons
of the past and are now establishing and running their venture units in a
new way, hiring a mixed team of experienced venture capitalists to work
alongside business managers and entrepreneurs while ensuring senior
buy-in within the corporation.
Despite this, the current state of corporate venturing in the UK is
mixed. Corporate venturing is showing itself to be an efective way of
channelling foreign investment into the country and as an approach
which ofers greater diversity and longer timeframes for investments
than the ailing conventional venture capital sector. However, the scale of
corporate venturing in the UK remains modest. Few deals reach the scale
judged to be the most efcient size for venture capital.
The key barriers seem to be access to suitable and high volume deal-
?ow. Some corporations also worry that the regulatory framework may
not be as friendly, and the UK government not as proactive, in its support
for corporate venturing as overseas. It may be that these concerns are as
much about perception as reality since other investors do feel the UK has
much to ofer in terms of high potential entrepreneurs and a regulatory
environment which is, at least, equivalent to other countries. It seems that
challenging perceptions is important but getting strong-deal ?ow in the
right sectors and creating as friendly a regulatory environment for inves-
tors as possible will be vital to attract corporate venturing to the UK.
There are a number of measures policymakers could consider as ways of
strengthening the ecosystem to encourage and support corporate venturing:
Venture connectivity
•
The government should establish a forum designed to encour-
age UK-based executives to consider starting or expanding their
venturing programmes. The forum could undertake a number
of roles including: presenting investor analyses and working
with stock exchanges so the potential of companies with suc-
cessful venturing programmes is understood and recognised;
looking at gaps in the corporate venturing ecosystem and under-
standing how they could be ?lled; mentoring portfolio company
executives and investors; and exploring how the government
Corporate venturing
is showing itself
to be an efective
way of channelling
foreign investment
into the country
Corporate venturing in the UK 6
can create connections between smaller companies looking for
investment and corporate venturing units
Co-investment
•
The European Commission is considering establishing an in-
novative co-investment scheme to aggregate medium-sized
corporations interested in a speci?c sector. Developing a similar
approach in the UK could ofer ?rms a relatively easy entry into
venturing without having to set up a fund of funds to cater for
all parties across multiple sectors. The natural mechanism in
the UK to allow such a development is a variation of the existing
Enterprise Capital Fund.
Fiscal incentives
A series of ?scal measures could be taken to incentivise and remove barri-
ers to corporate venturing.
•
An accelerated ‘qualifying venture investment allowance’ for
corporations would reward or recompense risk-taking by corpo-
rations in UK ventures.
•
The government could also seek to encourage ‘serial venturing’
by changing the capital gains rules so that disposal could be
deferred if pro?ts are reinvested in further qualifying corporate
venturing.
•
For overseas companies investing in UK-based risk assets there
could be a structure to allow them to use ofshore cash with
little UK taxation and the ability to repatriate the money if the
investee sets up a subsidiary in the UK.
•
Corporate venturing could also be put on the same tax level as
independent venture capital funds.
•
To encourage corporations to be limited partners in independent
venture capital funds, corporate limited partners could be as tax
exempt as pension funds and investments and could be classed
as outsourced R&D because of the length of time from commit-
ment to potential returns.
•
There is also a strong argument for restarting the Corporate
Venturing Scheme, wound up by the last government, while al-
lowing a higher proportion of relief against corporation tax than
that scheme provided and for increasing the size of a qualifying
target company from £7 million to £25 million.
7 Introduction
Introduction
Recent years have seen an increase in corporate venturing. This has been
preceded by waves of activity in the 1960s, 1970s, 1980s and 1990s; which
saw increases in corporations starting or massively increasing their mi-
nority investments in third parties at the end of the economic cycle. This
pattern is not surprising. Venture capital as an asset class is pro-cyclical;
more money is invested as the economic cycle reaches the latest stages of
most rapid growth before the downturn and potential recession causes
deal-making to plummet.
Historically, corporations have been even more pro-cyclical than their
independent venture capital peers; the latter have the cushion of ‘blind
pool’, 10-year life funds which give them more ?exibility about when
to make investments. Corporations, however, often fund their venture
investments from the balance sheet with allocations made each year.
Governments have often encouraged this pro-cyclicality by ofering tax
breaks or regulation changes at the tail end of the cycle to try to pull in the
?nal, uncertain stragglers. This included the UK’s Labour administration,
which introduced the Corporate Venturing Scheme in the 2000 Budget.
The tendency to pro-cyclical investment and the losses endured during
the dot.com bust mean most corporations have retreated from corporate
venturing and shut or spun of their incubators and investment teams,
selling their limited partnership commitments to venture capital funds.
However, the idea of corporate venturing has remained alive and more
recently has attracted the interest of policymakers. Countries, including
France, Germany, Israel and the US, have begun to develop a coherent
policy package with the aim of encouraging corporate venturing, includ-
ing new funds to support start-ups.
This is partly because those corporations that retained and re?ned
their venturing policies after the dot.com bust have outperformed their
non-corporate venturing peers by most important metrics, accord-
ing to research by London Business School associate professor Gary
Dushnitsky.
1
This out-performance and its causes have started to be
noticed and rivals have set up new venturing programmes or started
afresh with more speci?c goals and more quali?ed teams.
In addition, the ?nancial crisis that began in summer 2007 has forced
governments, companies and individuals to re-evaluate their reliance on
debt to leverage returns over the past 100 years. This in turn has led them
to look at the role that innovation can play in boosting the equity part of
their balance sheets through ?nding new sources of revenues or cutting
costs to increase margins or pro?tability.
According to the newswire Bloomberg, corporations remain well
capitalised with $1.5 trillion of cash sitting on the biggest European
companies’ balance sheets and a further $2 trillion on those of their US
Corporate venturing in the UK 8
peers.
2
They have the means and desire to turn to corporate venturing
as part of a more open model for developing innovation. By contrast,
the pool of alternative long-term institutional investors funding venture
capital ?rms set up after 1945 has started to collapse with the retirement
of the baby boomer generation and the systemic failings in the broader
?nancial services industry to allocate capital efectively, favouring instead
the generation of pro?t through fees.
In addition, the consequences of having about 3 billion people –
efectively the BRICs (Brazil, Russia, India and China) – join the broadly
capitalist economy with few restrictions on capital controls has opened up
near exponential opportunities to ?nd entrepreneurs with disruptive ideas
or business models. This has created competitive pressures unseen since
before the First World War.
Finally, the number of potential and actual entrepreneurs is accelerat-
ing as the cost of basic technology in a number of industries is falling
rapidly, leaving the challenge one of scaling up and distribution through
corporations’ established sales and marketing eforts.
Given the problems encountered during previous waves of corporate
venturing, it is inevitably risky to suggest that this time it is diferent but it
seems that, under current circumstances, it may be justi?ed. For the ?rst
time, corporate venturing has started to gain traction both for companies
and entrepreneurs at the start of the economic cycle. For governments,
implementing the right policies now could prove critical to boosting
their employment rates and gross domestic product, and in gaining
competitive advantage.
Cadbury’s likes taste of success
The chance to take your ideas into the mainstream and encourage fairer
practices is one of the ways whereby the partnership between large,
established corporations and nascent businesses can be aided through
corporate venturing.
For organic chocolate maker Green & Black’s (G&B), whose Maya Gold
chocolate was the ?rst Fairtrade product to go on sale in the UK in 1994,
that chance came in 2002 when the UK’s largest chocolate maker, then
called Cadbury Schweppes before its acquisition by Kraft Foods, acquired
5 per cent. Three years later, Cadbury bought G&B outright.
While some at the time of the 2005 acquisition worried Cadbury would
reverse G&B’s organic and ethical stance on buying chocolate from Belize
farmers at a set amount, Cadbury later rolled out the Fairtrade logo across
its broader range of chocolate. This was a turnabout, as even the year
before Cadbury had repeated its opposition to the principle of ?xing the
prices it paid to cocoa farmers.
9 The record of corporate venturing
The record of
corporate venturing
The history of corporate venturing, as with venture capital more
broadly, is dominated by the US and there are few data points on the
global perspective until the last decade. In the 1960s and early 1970s,
a quarter of Fortune 500 ?rms had a corporate venturing programme,
with industrial groups 3M and DuPont, in particular, popularising
corporate venturing from the late 1960s onwards. These programmes
were largely wound down in 1974 and 1975 due to the oil shock and
ensuing recession.
The second wave began in the early 1980s after the US and UK econo-
mies emerged from 1970s stag?ation and the early impact of Reagan and
Thatcher tax and monetary policy. This wave was fuelled by the growth
of the computer and electronics sectors, peaked in about 1985 – with 100
corporate venturers investing just under $1 billion – and came to an end
in the late 1980s, again because of recession.
The third wave began during the 1990s technology boom, in particu-
lar after the internet services provider Netscape was ?oated on the market
in 1995. It peaked in 2000 before falling steeply to the middle of the past
decade. This wave was driven by a combination of new technologies –
internet, microprocessors, telecommunications and biotechnology – and
a bubble economy that made it seemingly possible to make quick returns
by investing in new technologies.
As a result, from relatively low beginnings in the early 1990s, an
estimated 350 corporate venturers invested $16 billion in 2000 in the
US – 500 invested more than $22 billion globally – making up about 16
per cent of all venture capital investment that year (see Figure 1). The dot.
com implosion in 2001 wiped out previously booked earnings and many
investments, causing corporate venturers rapidly to retreat. By the ?rst
half of 2007 in the US, corporate venturers invested only $1.3 billion: 8
per cent of total venture capital invested.
an estimated 350
corporate venturers
invested
$16
billion
in 2000 in the US
Corporate venturing in the UK 10
Figure 1: The share of US venture capital dollars accounted for by
corporate venture capitalists, 1995–2009 (see appendix for further
?gures)
0
8
6
4
2
10
12
14
16
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995
Source: Created by BusinessWeek from data collected by the PricewaterhouseCoopers/
National Venture Capital Association MoneyTree Report and Thomson Reuters.
In the UK and Europe, corporate venturing has tended to follow the US
experience. Professor Julian Birkinshaw has estimated that just before
the dot.com implosion three-quarters of FTSE 100 ?rms had a corporate
venturing unit.
3
A European Commission survey published in 2000, estimated direct
corporate investments totalling €1.2 billion per year by about 84 compa-
nies.
4
This money went to about 500 companies between 1995 and 1999
and represented 10 per cent of total European venture capital and 40 per
cent of early-stage investing. However, by 2006 the European Private
Equity and Venture Capital Association (EVCA) found that only €322
million was invested by corporations in about 175 deals.
Some have argued that corporate venturing’s decline after the dot.
com boom may not be simply a cyclical efect but also relates to inherent
weaknesses in the corporate venturing model. Birkinshaw, writing with
Andrew Campbell from Ashridge, has argued: “Almost all units set up
to create new opportunities for a company fail to develop any signi?cant
new businesses.”
5
Birkinshaw and Campbell identi?ed three main rea-
sons: early-stage venturing is very hard to do successfully; corporate ven-
turers have no particular advantage over independent venture capitalists;
and the new ventures that do start up within a corporate venturing unit
often attract little attention or commitment from the core of the company.
As a result, Birkinshaw concluded:
“These obstacles to corporate venturing appear to be insurmountable. In
our research, we could ?nd no examples of new legs being developed from
a venturing unit that passed the test of being ‘signi?cant, permanent new
businesses’, meaning they are pro?table, are part of the parent company’s
portfolio and amount to 20 per cent of sales or $1 billion in value. Even
when the research was extended back to venturing units set up in the 1970s
or 1980s, none of them spawned a new business that passed our signi?-
11 The record of corporate venturing
cance and permanence tests. Corporate venturing units do not, it appears,
deliver growth.”
And yet corporate venturing is on the rise again. Last year, more than
550 corporate venturing units from around the world agreed more than
1,100 deals, including exits, as part of broader consortia investing over
$26 billion.
6
It appears that the lessons of the past have been taken on by
the survivors of the dot.com bubble and new entrants through hiring a
mixed team of experienced venture capitalists to work alongside business
managers and entrepreneurs while ensuring senior buy-in. Dushnitsky’s
work at the London Business School over the past decade shows how the
average life of a corporate venturing unit now surpasses the average chief
executive’s job tenure and that venturing units often have advisory boards
made up of senior representatives of business units and report to the
executive board.
7
Dushnitsky argued that companies with corporate venturing units
outperform peers without a minority investment strategy; both by a com-
pany’s market-to-book-value ratio and its innovation capacity, as judged
by patents. He found that between 1987 and 2009, 602 of a sampled 5,313
corporations engaged in venturing and concluded: “Companies with
corporate venturing units outperform peers in similar ?elds judged by
patenting output and using a market-to-book-value ratio.”
8
Indeed, over
the past decade there have been a number of examples where companies,
such as Nestlé, Intel and Cisco, have efectively created large business
lines through their minority investment strategies.
Corporate venturing in the UK 12
The state of corporate
venturing in the UK
Data and information provider Global Corporate Venturing tracks 37
UK-based corporations with a venturing programme.
9
In 2011 this in-
cluded four launches of new corporate venturing units – advertising ?rm
BBH, industrial group Marshall, ?nancial services ?rm Icap and media
group BBC. Established corporate venturing unit SR One, from drugs
company GlaxoSmithKline, also set up a dedicated UK fund.
Of the 55 corporate venturing deals in the UK last year (excluding four
trade exits, one ?otation and one merger and acquisition)16 were in the
healthcare sector, followed in order of popularity by IT, media, services
and clean-tech.
10
Although more than a third of deals were for portfolio
companies at undisclosed stages of development, 13 of those that did
reveal their maturity were in the seed or series A round. This is notable
because the European Venture Capital Association says there are fewer
than ?ve venture capital (VC) ?rms operating at this stage across the
whole of Europe. This means corporate venturing units can be comple-
mentary to the entrepreneurial ecosystem by going into areas from which
VCs appear to be shying away.
In addition, Global Corporate Venturing tracks 24 corporate ventur-
ing units sponsored by foreign corporations with staf in the UK. These
foreign corporations cover the main sectors from health, industrial and
?nancial services, to media and technology, re?ecting the breadth of the
UK’s economy.
Of the 61 investments and exits in the UK last year, 38 involved a cor-
porate venturing unit with overseas parent as part of the deal syndicate.
11
As such, corporate venturing has become an important way for foreign
direct investment to arrive in the UK and a signi?cant way for venture-
backed companies to ?nd an overseas buyer. Last year, for example,
South Korea-based Samsung acquired venture-backed technology com-
pany Liquavista for about £32 million ($50 million) after Samsung had
established a European corporate venturing ofce in the UK.
The UK also appears to be doing well with regard to the number
of corporate venturing units present in the country when compared to
economies of a similar size. So while the UK has 37 active corporate ven-
turing units from local parents, Germany has 31, France has 29 and Italy
eight, according to Global Corporate Venturing’s data. There are slightly
more deals done in Germany than France (from local and overseas-based
corporate venturing units) with 39 and 14 completed last year in the two
countries, respectively, and none in Italy. The UK is well in the lead in this
regard with 55 deals completed last year.
The UK also
appears to be doing
well with regard
to the number of
corporate venturing
units present in
the country when
compared to
economies of a
similar size
13 The state of corporate venturing in the UK
It is important that these signs of corporate venturing success in the
UK continue not least because conventional venture capital is looking less
than healthy in the UK. There were 314 venture capital deals in the UK
last year, with $1.6 billion invested. This was down 32 per cent from 2010.
Private equity ?rms made up the majority of deal-?ow, involved in 235
deals worth an aggregate $1 billion, down 41 per cent from 2010 ?gures.
12
The UK still leads European venture capital,
13
however, it is being rapidly
overtaken by other, emerging markets, such as China, which poured $9
billion into 976 deals last year; up 50 per cent and 16 per cent by value and
volume respectively.
Business Insider looked at internet companies expected to be worth
more than $1 billion in 2011. Only one UK venture capital fund has
backed more than one of the top 24 deals, even though ?ve of them have
UK roots.
14
By comparison, US-based venture capital funds have backed
twelve between them. Switzerland-based funds have backed seven,
Russia’s DST two and France’s Idinvest two.
By being drawn from all sectors of the economy and with often strate-
gic rather than purely ?nancial reasons for investing, corporate venturing
units can diversify their venture investment from a narrow focus on
certain sectors and those companies only able to ofer returns over the
shortest time period.
Rahu ?nds right chemistry for Unilever
The hardest area for corporate venturing to help its parent with is regarded
as the spin-out and successful development of intellectual property. The
achievement, therefore, of Anglo-Dutch-listed consumer goods conglom-
erate Unilever in selling one of its corporate venturing unit’s portfolio com-
panies to OM Group, a New York-listed coatings provider, is impressive.
OM bought Rahu Catalytics, which provides materials for environmen-
tally friendly coatings, composites and inks, from Unilever Ventures (UV)
and the company’s management. A source close to the deal said the price
tag was about £35m ($50m).
Rahu was founded in early 2006 as a spin-out from Unilever Ventures,
which incubates ideas and takes minority equity stakes in UK entrepre-
neurs and is managed by co-founders Paul Smith and Dermott Hill. John
Coombs, managing director of UV and non-executive chairman of Rahu,
said: “It has been a very successful spin-out for us of [intellectual property]
developed in the Unilever [research and development] labs originally for
washing powder.”
Since early 2009, Rahu has operated under an exclusive commercial
agreement with OM Group with regards to its Borchi Oxy-Coat
product line.
Corporate venturing in the UK 14
What do corporate
venturers think of
the UK?
While these developments are encouraging, interviews conducted with
some leading corporate venturers for this paper suggest that the UK’s
position is far from secure and has yet to operate at its full potential.
For indications of how fragile the UK’s place as a venture and innova-
tion hub is, the warning from one London-based head of a US-listed
corporation’s venturing unit (who wanted to remain anonymous) was
salutary. The venture head stated his unit was moving to Paris as “France
has more innovation and now has critical mass and deal-?ow” compared
with a decade earlier. His company had set up its corporate venturing in
the UK because it had facilities in Britain which was then the undisputed
hub of venture capital but times had changed.
Unfortunately, such stories are not rare. Since 2000, a number of
other corporations have closed their UK corporate venturing bases.
This includes medical company Johnson & Johnson and publisher
International Data Group (IDG). As Patrick McGovern, founder of IDG,
which manages $6.8 billion in corporate venturing assets, said:
“In 2000, IDG Ventures did have a fund and operating team of general
partners in the UK. Unfortunately, we found that the expected [return on
investment] of the fund, which was higher than average for venture funds
based in the UK, was not as high as the returns we were receiving from our
venture funds in the US and Asia. We decided to sell the venture team and
its operations to a prominent private equity fund in the UK.”
15
Attracting new corporate venturing units to the UK may also be
challenging. While Georg Schwegler, managing director of Deutsche
Telekom’s T-Venture unit, disputes the claim that there is a lack of deal-
?ow in the UK, he has no plans to establish a unit in Britain. He stated:
“On the portfolio side, UK law gives us lots of burdens when it comes to
statutes and shareholder agreements. Closing local contracts is expensive.”
The global competition to attract corporate venturing is intensifying.
Advisers to the US, Israeli and German governments are now actively
looking at changing their policies to encourage corporate venturing. In
particular, France has seen some of the most interesting developments.
Broadly, its national policy until the late 1990s was about creating
15
‘national champions’ out of large enterprises and later trying to use tax
incentives to encourage angel and venture funding for entrepreneurs.
Most recently, there have been eforts to bring large corporations together
into venture funds to support speci?c parts of the French economy and
complement its tax breaks for angel investors.
In the past year, these funds have included telecoms group France
Télécom-Orange and communications company Publicis Groupe jointly
committing €150 million to a venture fund to back entrepreneurs setting
up digital companies in France and the European Union. In addition,
state-owned rail company SNCF, oil major Total, France Télécom-
Orange and car maker PSA Peugeot Citroën founded Ecomobilité
Ventures to invest €30 million ($40 million) in sustainable transport
start-ups. Meanwhile, Aster Capital, a France-based venture capital
?rm formed by the merger of the corporate venturing units of engineer-
ing companies Alstom and Schneider Electric, had its size and reach
enhanced when it was joined by the chemicals company Rhodia.
As Martin Kelly, a partner of computer group IBM’s corporate ventur-
ing unit and part of the Innovation Fund Ireland’s board, stated:
“The most important considerations are availability of opportunities, not
tax breaks. So, for me, it is about access to great deal-?ow – teams, intel-
lectual property and so on – and an active community – start-ups, corpo-
rates, legal, media and so on. I also think in terms of cities not countries.
So the question for me is more London versus Dublin versus Berlin versus
New York than UK versus Ireland. I think we will see more alignment
around speci?c themes for innovation and so it is important that cities
pick those sectors and themes where they have a potential to capture a
unique global position.”
16
This is precisely the aim of the French approach.
This ?ts with the rationale behind new corporate venturing units’
location decisions. One group said as its focus was material science and
technology, it made a decision to locate in the heart of Silicon Valley,
California, although it had a UK-based parent. The unit head, who
wanted to remain anonymous, said:
“We recognised there would be a critical mass of resources and expertise
in this area uniquely suited to our requirements for partnering and other
relevant resources. We did not look at this on a country basis, such as the
US versus the UK. Rather we speci?cally chose Silicon Valley.”
Despite these challenges, the UK still has strengths to which the right
policy framework could play. Peter Cowley, head of Cambridge-based indus-
trials company Marshall’s corporate angel fund, Martlet, said for this paper:
“In my view – having spent ?ve years in Germany, albeit a while ago – the
UK is up with the US in terms of commercial innovative mindset and
support structures. London is crucially important: its size, its educational
establishments, the UK being in the top 20 of countries worldwide (by
some measures), the professional and altruistic support infrastructure. In
a word, London has maturity.”
17
What do corporate venturers think of the UK?
The global
competition to
attract corporate
venturing is
intensifying
Corporate venturing in the UK 16
Martin Grieve, head of consumer goods company Unilever’s corporate
venturing unit, added:
“The UK is a good place as it has a strong VC community, you can ?nd a
large population of skilled entrepreneurial people and the governance and
regulation are at US standards.”
18
Jon Lauckner, head of car maker General Motors’ ventures unit said:
“GM, through our Vauxhall operations has a presence in the UK, so it
made sense to have Jerneja (investment manager Jerneja Loncar) work
from Milbrook. We decided to make the move last year to get better
access on the start-up and VC activity in the UK and provide access to
other major European markets. Time and distance are key advantages as
compared with doing this remotely from the US.”
19
Mike Brown, a partner in US-based media company AOL’s venturing
unit, which has hired a UK-based senior adviser to help the fund build a
presence in EU, said:
“As a US fund with a global mandate and parent company that has
interests in Europe, we felt the UK was the best area of expansion for
us. Having been to many emerging countries, we felt the proximity [to
the US, Middle East, India and China], ecosystem and entrepreneurial
talent and quality was best in class relative to where we want to take
AOL Ventures.”
20
So the UK has a particular USP as a route into Europe and other
markets. Georg Shwegler of Deutsche Telekom’s T-Venture agreed but
sounded a note of caution: “The UK is typically a good cornerstone
for companies if they intend to go to Europe. However, we feel this is
changing and in the mid-term perspective continental sales people are
inevitable.”
21
Investors clearly have a mixed view of the UK as a location to grow
corporate venturing. Some feel indigenous entrepreneurial talent, the
vibrant London economy and access to Europe and the wider world make
the UK highly attractive. Others are far more sceptical.
This ambivalent perspective is re?ected in a study by Switzerland-
based venture capitalist Verve Capital Partners’ study of the perceived
attractiveness of a country for venture capital ?rms which shows the UK
performs relatively poorly.
22
Although the UK and Ireland have about
$39 of venture capital invested per person – this is above the European
average of $35 – Verve concluded that this was: “notably lower than their
attractiveness rating would suggest.”
In a similar vein, a study by Stefen Wagner and Lucas Laib added:
“The UK is commonly perceived to be one of the leading VC spots in
Europe [but] this counter-intuitive ?nding might have to do with their
centralistic economies focused on its large capitals. While especially
London remains a leading VC breeding ground, peripheral regions and
populations de?ate the actual ?gures of VC spent per capita. There have
17 What do corporate venturers think of the UK?
been attempts to arti?cially create start-up hubs in the periphery, but
more time might be needed for these initiatives to bear fruit.”
23
If corporate venturing is to deliver the growth and jobs in the UK
which it could then clearly this ambivalence must be addressed. Getting
strong deal-?ow in the right sectors is crucial as is creating a friendly
environment for investors when other countries, such as France, are
already vigorously pursuing programmes designed to encourage corpo-
rate venturing in their own economies. Otherwise the risk will be that
reality comes to match the more negative perceptions expressed above.
Amazon gives strong reviews to Love?lm
When Nasdaq-listed online retailer Amazon bought out the remainder of
the shares in UK-based movie rental company Love?lm for an undisclosed
amount in January last year, the companies said there would be develop-
ments but no immediate change to the logo or service terms.
Since then, Love?lm has continued to expand from a ?lm rental service
by post towards an internet-streaming media distributor with more than
two million members of its Love?lm Instant service. In January this year,
Love?lm said it was working with global electronics company LG to bring
Love?lm’s video streaming service to the Korean chaebol’s smart TV
platform. Love?lm has also signed up distribution deals with a number of
major content producers, such as Disney, ITV and BBC Worldwide, and
expanded into Germany.
For Amazon, the continued growth and maintenance of Love?lm’s
senior management represents a successful integration aided by the close
working relationship formed between the two companies through owning
equity. It also represents a turnaround from its previous effort to expand in
Europe’s ?lm rental market.
At the time of the acquisition, Greg Greeley, Amazon’s vice-president of
European retail, said: “Love?lm and Amazon have enjoyed a strong working
relationship since Love?lm acquired Amazon Europe’s DVD rental business
in 2008, and we look forward to a productive and innovative future.”
News provider Wall Street Journal said Amazon valued Love?lm at about
$320m but the cost was offset by its 42 per cent holding. While Amazon
reduced its cost of acquisition through its corporate venturing share
ownership, for Love?lm’s others investors, including venture capital ?rms
Index Ventures, DFJ Esprit and Balderton Capital, which came together
after the 2006 merger of Video Island and Screen Select and rebranding
as Love?lm, the exit was one of the largest of the year.
Corporate venturing in the UK 18
Creating the right
policy environment for
corporate venturing
There are a number of measures policymakers could consider as ways of
strengthening the ecosystem to encourage and support corporate ventur-
ing without having unintended consequences or trying to predict future
winners. These measures have been divided below into three broad areas:
venture connectivity, co-investment and ?scal incentives. The challenge
for all the recommendations will be further work to devise efective ways
to measure progress and efcacy without creating cost or operational bar-
riers. Modelling for unintended consequences and cost/bene?ts will also
be required.
In terms of order of priority, measures to aid venture connectivity
will help develop the demand and capital supply-side conditions which,
if efective, could then create the policy space and justi?cation for the
proposed co-investment approaches and the ?scal reforms.
Venture connectivity
The European Union’s 2000 report on corporate venturing identi?ed
opposition within corporations as a key barrier to establishing corporate
venturing units. As the report stated:
The most common reason for a corporation not to engage in corporate
venture capital is an unwillingness to divert management time from core
activities, linked with the feeling that it is irrelevant or not strategical-
ly useful.
In addition, a 1999 Confederation of British Industry (CBI) report
argued that peer pressure and education could help encourage greater
corporate venturing through initiatives designed to produce publications,
mentoring, networking or personnel transfer across industries along with
practical support to entrepreneurs through afordable expert advice,
perhaps part subsidised.
24
Such an approach would also help challenge
some of the negative perceptions corporate decision makers have of the
UK environment.
It would be bene?cial, therefore, for the government to establish a
forum designed to encourage UK-based executives to consider start-
ing or expanding their venturing programmes. This forum should also
be part of an advisory board structure on venture capital for govern-
ment – as used in Australia through work developed by the Bell Mason
19 Creating the right policy environment for corporate venturing
Group – so corporate venturing is part of the discussion on the wider
venture ecosystem.
The forum could undertake a number of roles including:
•
Presenting investor analyses and working with stock exchanges
so the potential of companies with successful venturing pro-
grammes is understood and recognised.
•
Looking at gaps in the corporate venturing ecosystem and un-
derstanding how they could be ?lled.
•
Mentoring portfolio company executives and investors.
•
Exploring how the government can create connections between
smaller companies looking for investment and corporate ven-
turing units. It is notable, for example, that the government is
a potential source of rich market intelligence resulting from its
extensive procurement activity.
Co-investment
The European Commission, via the European Investment Fund and other
planned mechanisms being created as part of its 2014 Innovation Plan, is
considering how to help corporate venturing. This includes an innovative
co-investment scheme to aggregate medium-sized corporations interested
in a speci?c sector. Developing a similar approach in the UK could ofer
?rms a relatively easy entry into venturing without having to set up a
fund of funds to cater for all parties across multiple sectors. The natural
mechanism in the UK to allow such a development is a variation of the
existing Enterprise Capital Fund.
In a similar vein, it is noteworthy that Wales and Northern Ireland
have introduced policies that mean that up to 75 per cent of venture
money is matched with public funds. This has encouraged corporate
venturing units to invest in those regions.
The challenge of any co-investment model backed by public funds will
be to ensure high performance. For example, it is notable that regional
venture funds supported by the state have tended to underperform on
returns. A 2009 study found government-backed funds had created
1,407 jobs in total, giving an average of just 1.8 jobs per company backed
between 1995 and 2008. The increase in pro?ts at these ?rms was also
found to be ‘modest’. The report also argued that regional funds have a
limited impact on start-ups.
25
Fiscal incentives
The EU report also concluded that the main obstacle to increased corpo-
rate venturing are levels of taxation. In particular, the report claimed that
the rates of capital gains tax and complicated tax regimes discouraged
equity investment.
26
A series of measures could be taken to incentivise
and remove barriers to corporate venturing.
•
An accelerated ‘qualifying venture investment allowance’
for corporations – 100 per cent in the ?rst year – which can
be thought of as analogous to the old accelerated capital al-
lowances but for a world where physical capital matters less,
would reward or recompense risk-taking by corporations in UK
ventures. If the ownership of those assets was ultimately not in
the UK then if a programme of investments overall generated
A 2009 study found
government-backed
funds had created
1,407
jobs in total
Corporate venturing in the UK 20
positive returns on realisation, the realisation would in efect
repatriate funds.
•
The government could also seek to encourage ‘serial venturing’ by
changing the capital gains rules so that disposal could be deferred
if pro?ts are reinvested in further qualifying corporate ventur-
ing. For the balance of any losses incurred, either through sale or
winding up, there may also need to be a relief made available.
•
For overseas companies investing in UK-based risk assets there
could be a structure to allow them to use ofshore cash with
little UK taxation and the ability to repatriate the money if the
investee sets up a subsidiary in the UK. The challenge with this
policy is it is contrary to the direction of travel by HM Treasury
that is trying to make inward investing more equal with UK-
based investors.
•
Corporate venturing could also be put on the same tax level as
independent venture capital funds. As one head of corporate
venturing said: “We are in competition internally over use of
cash so anything that makes us more efcient is good.”
•
To encourage corporations to be limited partners in independent
venture capital funds, corporate limited partners could be as tax
exempt as pension funds and investments and could be classed
as outsourced R&D because of the length of time from commit-
ment to potential returns.
•
As was mentioned previously, attempts to incentivise corporate
venturing were made by the UK in 2000 with its Corporate Ven-
turing Scheme (CVS). This was poorly timed, as corporations
were looking to shut rather than open schemes coinciding, as it
did, with the end of the economic cycle.
According to HM Revenue & Customs (HMRC), 74 companies were
raising £18 million from 256 investing companies using the CVS in its ?rst
year of operation. The amount fell gradually to a nadir of £8 million in
2006–07, before climbing in its ?nal three years both by aggregate value
and volume of investor companies before the scheme was wound up. The
number of investee companies held broadly steady. During its 10 years of
operation £132 million was invested in just fewer than 600 small com-
panies. A parliamentary select committee inquiry welcomed the overall
direction of the legislation but criticised the scheme for having “a lot of
very ?ddly little restrictions”.
The CVS scheme allowed: investment relief against corporation tax of
20 per cent of the amount subscribed for full-risk ordinary shares; defer-
ral relief from tax when the shares were sold and the funds reinvested;
and relief against income if shares were sold at a loss. The shares would
have to be held for at least three years to gain full tax credit.
Given the context set out above, there is a strong argument for restart-
ing the CVS and allowing a higher proportion of relief against corpora-
tion tax – between 30 per cent and 50 per cent – and for increasing the
size of a qualifying target company from £7 million to £25 million as that
re?ects the usual upper limit of an investment in a deal from an average-
sized venture fund. It will, of course, be necessary to ensure that any
such scheme is not burdened by the restrictions identi?ed by the select
21 Creating the right policy environment for corporate venturing
committee. As the government is currently operating in a period of severe
?scal constraint, the introduction of such a scheme would only be likely
when it was clear that less expensive measures such as encouraging ven-
ture connectivity and co-investment had created enough of a momentum
behind corporate venturing to ensure that the CVS was both cost efective
and bene?cial to the wider economy.
Corporate venturing has a clear role to play in growing parent ?rms,
start-ups and medium sized enterprises. It can encourage inward invest-
ment, boost jobs and, ultimately, GDP. US companies, such as Intel
Capital and International Data Group, have created multi-billion dollar
asset management units able to invest around the world and help their
core businesses and entrepreneurs.
However, a growth in corporate venturing will not happen in the UK
by accident. The UK needs to provide the right conditions to encourage
talented investors and entrepreneurs and larger business to come to the UK
as a welcoming shore where value can be added and exported across the
globe. In designing and balancing new ?scal and regulatory rules, we must
create a playing ?eld on which corporate venturing can compete and win .
Corporate venturing in the UK 22
Endnotes
1. Keynote presentation by Gary Dushnitsky, Associate Professor, London Busi-
ness School, at the Global Corporate Venturing Symposium in May 2011.
2. Bloomberg data in Denver Post, January 2012.www.denverpost.com/business/
ci_19831812
3. Professor Julian Birkinshaw, deputy dean of London Business School
4. Bannock Consulting Ltd, Corporate venturing in Europe, study for the Euro-
pean Commission DGXIII EIMS 98/176, (1999)
5. Julian Birkinshaw and Andrew Cooper: Know the Limits of Corporate Ventur-
ing, Financial Times 2004 www.ashridge.org.uk/Website/IC.nsf/wFARATT/Kn
ow+Te+Limits+of+Corporate+Venturing/$fle/KnowLimits.pdf
6. Global Corporate Venturing 2012 data exclusive for report
7. Gary Dushnitsky, Associate Professor, London Business School
8. Ibid.
9. Global Corporate Venturing op. cit.
10. Global Corporate Venturing op. cit.
11. Global Corporate Venturing op. cit.
12. Ibid.
13. Dow Jones VentureSource data for report, 2012
14. Business Insider, 2011 www.businessinsider.com/most-valuable-startups-eu-
rope-2011-12?op=1
15. Patrick McGovern, founder of IDG
16. Martin Kelly, partner, IBM
17. Peter Cowley, head of corporate angel fund, Martlet
18. Martin Grieve, head of corporate venturing unit, Unilever
19. Jon Lauckner, head of ventures unit, General Motors
20. Mike Brown, partner in venturing unit, AOL
21. Georg Schwegler, T-Venture
22. Verve Capital Partners, 2011. www.investiere.ch/blog/theory-vs-reality-ven-
ture-capital-europe
23. Ibid.
24. CBI, Connecting Companies, Using Corporate Venturing for Growth; No-
vember 1999
23 Endnotes
25. From Funding Gaps to Thin Markets: UK Government Support for Early
Stage Venture Capital, British Private Equity and Venture Capital Association,
September 2009
26. Bannock, op. cit.
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