SCOUTING TECHNOLOGY…THE NEW STRATEGY OF CORPORATE VENTURE CAPITAL
October 1, 2014
By Sherwin Pomerantz
Kyle Fugere of dunnhumby Ventures, a seed stage investment firm based in Boston, recently made some perceptive observations about the new strategic direction of corporate venture capital. In his words: “In a world of rapid innovation, corporations are inherently bad at adapting to change. Poor cross company communication and internal bureaucracy are often cited as the excuses for a failure to innovate. As Jack Welch, former CEO and Chairman of General Electric, famously said in 1995, ‘If the rate of change on the outside exceeds the rate of change on the inside, the end is near.’”
Given today’s rapid movement of technological change, every major corporation and most minor ones as well, are faced with the challenge not only of keeping up with those changes but also of finding those new technologies that will answer their growth needs for the next five years. In speaking with corporate executives, we often ask the questions, “When you look at your strategic plan for the future, what is keeping you up at night? What advances do you need to identify that will keep you ahead of the competition and enable you to continue to provide value added products and services to your customer base?”
Amazingly, some of the world’s largest companies do not have answers to these questions.
At the same time, there are those that have found ways to capitalize on technology trends. Two prominent examples of corporations doing this well are Intel and Qualcomm. These two companies have developed an approach to technology scouting that has served their growth patterns well. Not surprisingly, both have discovered a highly effective strategy: tracking down such emerging technologies in Israel.
Qualcomm, for example, in the last four years has purchased the Israeli tech firms iSkoot Technologies Inc., DesignArt Networks, EPOS, Wilocity, and CSR, spending over $600 million to grab these new technologies. Similarly, Intel in the last ten years has purchased Mobilian, Envara, OPlus, WindRiver, Comsys, Storewize, GraphTech, Neocleus, Telmap, Invision Biometrics, Idesie, and Omek Interactive spending over $1.6 billion on these acquisitions while making additional smaller investments in PassCall Advanced Tech, Jungo, Pulsicomm, TeraCross, InfoCyclone and Jordan Valley Semiconductors.
Israel with its over 4,000 tech startups and the highest concentration of creative technical talent anywhere in the world is a veritable souk for multinationals interested in finding solutions to their future tech needs.
As Kyle Fugere says in his closing comments, “Corporate venture capital has taken the appropriate shift from those from previous iterations and is setting a new precedent for innovation. By investing in the future, corporations are able to proactively compete by leveraging new technologies and market forces. Those who fail to do so are doomed to fall prey to a reactive cycle of low margins and decreasing market size.” And Israel is ready and waiting to be tapped for this purpose.