Gil BeydaContributorGil Beyda is a partner at Comcast Ventures.The startup media is awash with stories of corporate venture capital prioritizing their own interests over those of their portfolio.
While acknowledgingthat some of these stories may have a basis in truth, it critical to recognize there is much more to the story.It time the whole story istold.The truth is that not all corporate venture capital firms are the same.
And in fact, some have a strategic advantage because they have access to proprietary insights from dozens of markets and technologies that are simply unavailable to other venture capital firms.
Further, corporate venture capital firms can create synergies between portfolio companies and their parent companies to help accelerate business, an opportunity unavailable to most venture capital firms.Choosing between strategically focused and financially focused corporate venture capitalThere are two types of corporate venture capital, and it essential to understand the difference between them.
The first type, strategically focused corporate venture capital, provides significant benefits to all parties if done well.
These firms can help accelerate portfolio companies with revenue, market/customerinsights and technology/roadmap development.The second type is financially focused corporate venture capital.
These firms are run like typical venture firms and are primarily driven to maximizefinancial returns, and the firm partners are rewarded for makingprofitable investments.
These firms make investment decisions justlike every other non-corporate venture firm, based on team, market, competition,product, traction, capital efficiency, exit potential, etc.Once aninvestment is made, financially focused corporate venture capital firms often take board seats and work to add valuein all the same ways other venture firms do, with strategy, product, go-to-market,hiring, financials, etc.Becausethe financially focused corporate venture partners are financiallyaligned with their portfolio companies, they are just as motivated as any otherventure firm.Not all corporate venture capital firms are the same.Now, the upshot.
In many cases, a financially focused corporate venture capital firm can be a better partnerfor some companies.
Not only does the firm provide all the typical value-add of a typical venture firm — smart partners, large networks, etc.
— theyalsoprovide something that other firms can''t provide: proprietary insights.Financially focused corporate venture firmshave a close working relationship with their corporate parent, whichallows them access to technology, industry operators andvisionaries, giving them proprietary insights to which normal venture firmssimply don''t have access.
These proprietary insights give financially focused corporate venture capitalpartners the ability to see the market and technology landscape in adifferent, more informed, way.The bottom line isthat financially focused corporate venture capital firms have all the benefits of a typical venture firm plus exclusive proprietary insights — without the potential downside of strategically driven corporate venture capital firms.The truth about corporate venture capital and competition with the parent companyOne obvious objection to corporate venture capital is that these firms are unlikely to invest incompanies that compete with its parent or may put it out of business.These cases are so rare that it is barely worth mentioning, but I will explore them here.
Comcast and NBCUniversal are large companies doing business across a wide variety of sectors.
It is unlikely that any one startup would put them out of business.
In my 10 years in venture, I haven''t found one yet.But what about startups that are competitive with Comcast or NBCUniversal I have seen thousands of startups over the years and have only come across a handful that are competitive with Comcast or NBCUniversal.
In those cases, even though I would not have ever communicated confidential information to my parent, I quickly passed so as not to give even the smallest impression of impropriety.
In some cases, the competitive startup and our parent see a benefit to making the investment and learning from and partnering with each other, but this is done transparently.By the way, most venture capital firms restrict themselves from investing in companies that are competitivewith their portfolio.
However, there are some venture capital firms that take a more &survival of thefittest& approach and encourage making many investments in a hot spacewithout concern for competition.Corporate venture capital at work in the real worldTo illustrate the advantages of working with a financially focused corporate venture capital firm,let look at a real example — my investment in blockchain.
Comcast islooking at using blockchain technologyto allow users to create a unique digitalidentity and associate it with IoT devices in the home to controlaccess to those devices.Given my affiliation andclose working relationship with Comcast Corporation and NBCUniversal, I was afforded a front-row seat to the potentialadvantages and disadvantages of leveraging cutting-edge blockchain technology to solve real-world problems.No other venture capital firm has this level of access to early use cases.
Here what that looked like: I met with the team developing this technology before it was madepublic.
I spoke with the engineers to understand how they were using blockchain, why they chose it and how it helped their efforts.
I saw ademo and got to play with it.
This hands-on experience was invaluable to blockchain executives — and it was only afforded to&members of the Comcast family.& Further, the insight also helped inform my investment thesisaround blockchain, so I could better serve their business interests.It comes down to real-world problems, being solved byreal-world practitioners.
There are many applications of blockchain technology.Another group within Comcast is looking at howblockchain could be used in advertising.
Beyond that, Comcast and NBCUniversal are looking at blockchaintechnology and how it relates to identity, rewards and loyalty,security and IoT, to name a few.It comes down to real-world problems, being solved byreal-world practitioners, who are experimenting with blockchain.
These proprietary insights havebeen helping drive our investment strategy in blockchain technologiesand token-based economies.
We have already made a number ofinvestments in the space and continue to believe there are investment opportunities at the protocol, platform, infrastructure andapplication levels.Outside of blockchain, there are a number of examples within Comcast Ventures that also show advantages of leveraging resources at a corporate venture capital firm: EdgeConneXsuccessfully pivotedits business model with the help of Comcast; Brightside wasincubated and spun out, securing Comcast as its first customer; Zoladeveloped partnership opportunities with NBCU; Comcast became one ofDocuSign largest customers; and Icontrol wasacquired by Comcast.Setting the record straightFinancially focused corporate venture firms have super-talented partners in the firmwho can help entrepreneurs build great companies.
Just like otherventure capital firms, we are financially incented to find the next billion-dollarcompany, and we invest in your strategy, not ours.But unlike other venture capital firms, we have exclusive proprietary insights intodozens of markets and technologies.
And, we also can create synergies between portfolio companies and Comcast and NBCUniversal to help accelerate growth if there is mutual interest and benefit.
Finally, we are measured on financial returns, so we win only if you win!Disclaimer: Gil Beyda is a partner at Comcast Ventures, a financially focusedcorporate venture capital firm which is the venture arm of Comcast andNBCUniversal.