Enterprises, Venture Pros Team Up
Venture capitalists and corporate executives. In many ways, they seem worlds apart. Venture capitalists are typically entrepreneurs who embrace new ideas and business models with as much gusto as corporate executives usually embrace prudence.
Corporations investing in IT startups are increasingly breaking down that dividebut not always on their own. Many of their venture arms are partnering with outside incubators to launch companies or turning to professional VCs to find and substantiate deals before signing a funding check.
"You need a history in an area to be able to find deals and know who you can trust," said Nicole Weber, an analyst at International Data Corp., in Framingham, Mass. "You cant just pick up from a Middle America office and pop into Silicon Valley and begin venturing."
Eastman Chemical Co., for example, avoids funding startups without professional help. The Kingsport, Tenn., company typically joins with one or more professional venture capital companies when funding a startup. The VCs play a critical role in structuring the deal, while Eastman focuses on how the startup plays into its larger e-business goals, said Mark Klopp, managing director of the companys venturing group. "We position ourselves to partner with VCs rather than compete," Klopp said.
To partner with VCs, Eastman also found it helps to be near the action. Thats why, when forming the venture group in 1999, Klopp relocated to Danville, Calif., which is near Silicon Valley, to be near VCs with the financial expertise.
The Coca-Cola Co. has taken it even further. The beverage giant partnered with the Advanced Technology Development Center at the Georgia Institute of Technology rather than go it alone when it formed its venture subsidiary, Fizzion LLC, to incubate tech startups. Fizzion is led by Coca-Cola executives and housed on the companys campus in Atlanta, but it needed the ATDC, which has experience working with startups.
"Neither of us could do what were trying to do by ourselves," said Chris Lowe, president of Fizzion.
Why not just hire a professional VC to run a venturing arm? Chevron Corp. considered it when forming its Chevron Technology Ventures LLC subsidiary. The conclusion: It would be easier to develop VC skills than to have a venture capitalist adjust to a corporate climate like Chevrons, said Cliff Detz, venture executive for the group, in San Francisco.
"Its hard for someone from the outside to come into a large, multifaceted corporation and quickly find out where all the connections are," Detz said.