 What can corporate venture capital bring to the table? What is it good for? We're basically cutting to the chase now the first session here We're gonna talk about all right money Lots of startups here. They're all looking for funding. I'm sure I'm very excited to Speak to you guys today first off just wanted to mention that Sally Krawcheck who is who's going to be with us and unfortunately cannot she has a very interesting story to tell about that But we can talk a bit maybe about Ellen best and what she does because she's taken With that company money from a number of different traditional VCs corporate VCs the angel investors all that kind of stuff We're gonna that's there. Yeah, exactly. You guys are too so Very excited to do that today and like they mentioned at the beginning I'll you have some of your questions here if you if you ask via Slido and and and I can put it to the to the panel here So let's talk about corporate venture capital Just throwing out some stats to kind of set the scene active global corporate investors have tripled since 2011 and 75 of the fortune 100 companies are Active in some sort of venturing either like an official venture capital fund or they or they invest in that sort of way These these days venture Deals about 30 to 40 percent of them involve some Corporate venture capital involvement is these these numbers are sort of rough and in terms of corporate venture capital There's about 25 billion dollars in funding in 2016. I saw a stat there This is definitely a meaningful alternative to traditional institutional VCs You know Salesforce is one of the most active ones and has been for a long time and I think any You know start up looking for money will will come across these people now So that I want to talk a bit about the distinctions how to pitch corporate venture venture capital whether Different stages of the company it makes more sense. So just start off with let's talk You know answered the question basically that that that that we have That we pitched to the panel here. What sets corporate venture capital apart, you know for you. Yeah, Matt I mean, you know, what how is it different and and and yeah, yeah so I think it represents a bit of an evolution of the Venture capital industry in that You know, yeah, what corporate venture is a bit different and there's unique aspects to it but I think if you look at most entrepreneurs now and how they think about fundraising and at the various stages that They're looking for investors that can add a lot of differentiation So who you're gonna look for depending on the sector you're in at an early stage and at various stages is gonna be very different And you're not just looking for money, but you're looking at who's gonna be the most valuable So at some stages you want really smart seed investors who were individual operators in a specific area If you're at the later stage you may want a specific growth equity partner And I think that the corporate venture is is a is a part of that in that It's very different the value add that corporate venture arms can add and some probably don't add a lot of value And some add more value. So just like venture arms I think it's very some some partners are great board members and they're super helpful and some are not that helpful but the distinction with the corporate is you know, pretty obvious in that the the The help they can provide in terms of they probably have a large customer base. They can help drive you into their channels Your your you know, maybe want to get acquired by them So I think there's a lot of natural overlap the real key thing is you have to really figure out what that value is How do you unlock that value? What's are they are they good actors? Do they have a good reputation for being? Entrepreneur friendly how helpful they can they be so I think it's you still have to ask a lot of the same questions But I think the distinction really is that you know, they have a large installed customer base that you want to take advantage of Yeah, we were talking a bit backstage to you about the kind of Blending of these different things that it's it's not necessarily a majorly distinct Right and and maybe even in terms of the sequencing and and stage of companies that that get involved Maybe it's a bit earlier now. It used to be a bit later with corporate venture. Is that yeah I think it depends and so again, I think what you're so for us we tend to invest is when we see a company that is You know starting to bump into our bump into sales force and their customers Their customers are saying it'd be really great if you had a better integration with sales force And so that's really a really good time to you know start to think about how do I work with how do I partner with? With a with a corporate arm and I also think that the corporate arms particularly those that have been investing for a long time They behave Mostly like rational investors and so it's easier to engage with them earlier on It's not as onerous as it was maybe historically So I think it is easier to engage with them also at the earlier stages. Yeah got it Neil first tell us a bit about Silicon Foundry because it has an interesting sort of model And you have a very good perspective on the corporate venture capital world You connect big companies to startups and you've and you've seen how this space has evolved Along with your company to sure sure so Silicon Foundry We were started in 2013 by the co-founders as well of sharper capital which is a venture fund based in Silicon Valley What we were started and our core business is we work with corporations the world over the u.s Europe Middle East in Asia as they're trying to navigate the startup ecosystem and they're looking to identify the most Promising emerging startups and entrepreneurs because they want to engage them either as a customer a partner a strategic investor or you know As potential acquisition targets Most of our members we call them It's it's part of our model they have corporate venture arms or they are thinking about launching them Or they've launched them in the last five years and it's a very powerful tool It's a very direct tool right as they're out looking at startups And I would say many want to see the earliest of stage startups But when they think about investing they probably are still focused on their later stage companies later stage defined as you know This startup has a product has a product of market It's got customers because they can really engage and work with them. They can then leverage all of these Unique benefits that a corporate can bring to the table right whether it's accessing that the corporate themselves as a customer or their Customers in turn providing distribution and whatnot And so we've definitely seen this evolution I think there's there's certainly a lot of you know the right ways to both Implement a corporate venture arm and then really execute it But it is again It's one way in which you can work with startups and certainly for as Matt was saying You know if you're a founder of raising capital it used to maybe that you would say well Let's start talking to potential corporate Interest and investors in the CRD round and now it may be as early as a or at the very least Let's make that connection today. If this is an early stage company Let's build that relationship and then you know you can potentially go to them later rounds also and that and that suggests to me that that the Amount of money we're talking about in these in these coming from corporate venture capital might be a bit smaller than it used to be You tend to think of it as pretty big rounds like you said CRD. They are they are no I mean and I think the one another stat and you had a lot of good stats right a thousand corporate venture arms 250 of which were active in the first half of this year One of the stat I was referring to is the corporate venture valuations are the rounds where corporates involved are 30% higher Than others so that is indicating they're probably also larger rounds in somewhat slightly later stage When we have corporates who want to see really early stage companies usually it's it's for you know insights and discovery and awareness But that being said, you know the other element that that is Complementary to corporate venture and intertwined many cases is where they're doing accelerator programs, right? So maybe they're they're working with cohorts of early stage companies And yet at the same point we've seen some of those accelerators like Disney Started earlier stage and then now they've really transformed it to work with established companies that have raised You know institutional venture dollars, right where they know they can take that company They can take it into their organization and that organization can then really work with them and do the kind of deals that then Provide, you know a step function right in their progress. So, you know the question that often comes up now is if Sort of why why are? Corporates doing this if they wanted, you know the pure kind of venture capital exposure and they're looking for returns and that kind of stuff Which is probably not the case, but like they would just Those people would just launch a traditional or even invest in a fund directly. Yeah, yeah, so yeah Well, I think what you're seeing is that You know separate two things I think what's unique about salesforces, you know, we are a platform company So it's very easy for startups to build on our platform Either through our enterprise app store or on one of our force.com Heroku and then plug those products into sales for a sell-in to our user base and create a unified user experience And so like that go to market And how we're helpful to those companies is very very clear and very very easy and I think We are a tech company. So for us to be involved in the tech space is pretty clear I think what you're seeing in a lot of industries though Is that every industry is becoming a tech-enabled business? So I meet with a lot of customers whether they're in the industrial sector or wherever their business or retail their business is getting disrupted and so and it's getting disrupted by Amazon and You know outsourced manufacturing and so they're looking for higher value-added services and those are all being driven by Software so I think when Andreessen said software is eating world that that's really what that means And so in order to get their arms around that one of the best ways is through Corporate venturing and so I think that's really why you're seeing this continued increase in corporate venture arms I think the challenge is and the thing that's really hard to figure out and I think this is where Neil is very helpful is Kind of why I use the example of Salesforce It's very clear how we can help startups how you can plug into our ecosystem and how we can take advantage of that if For every investment we make we have a GM who's had a product who if we're not going to build or buy something and we invest in the Company and we partner with them our customers are happy because they're getting access to this innovation that we didn't develop the GM now has This this you know really good strategic partner that's solving that need the customers getting access to all this through one You know unified platform than a sales force But if you don't have that platform approach you have to be very thoughtful then of like okay How can I actually work with this company and take advantage of it? And I think it's a really really hard thing to do and I think that's where you know The things that that Neil and his team do are really valuable because they can help companies Maybe it's not even investing but help them come to Silicon Valley. Well, I'll let you talk about it But I think that's why they're incredibly valuable. Yeah. Yeah I mean what one question that's that's that's here and then I also have to is is is is how Corporate venture funds source investments. Is it is it any different? Somebody like Silicon Foundry could help with that. But yeah, I wonder if the approach is gonna be different for us than probably a lot of his Right. Yeah, I think the sourcing is very much the same as an institutional VC, right? It's being out in the market having entrepreneurs understand. What are your focus areas? What stage do you like to play at? How do you engage and what value can you bring to them? Perhaps corporate VCs also end up de facto sourcing from their teams around the world, right the broader organization I was in corporate development at Adobe and we were doing and macromedia previously And we were doing investments off the balance sheet and we would get phone calls from the GM in Asia, right? Who was saying hey Here's the start if you got to check out because they may be seeing it in the sales Situation, but I think the sourcing is the same and ultimately boils down to visibility across the ecosystem and of course with the most The most promising entrepreneurs, right? It's just like institutional VCs You want to work with the best companies which goes back to maybe 500 companies in a category But ultimately it's who are the top five, but I think I think Neil's being a bit modest here in that so for us We're based in Silicon Valley our CEO Mark Benioff is You know an entrepreneur many of the GM's were acquired in or started with Salesforce So we're in that startup ecosystem where you know, I we have probably 50 Portfolio companies within five blocks of our office. Everyone's coming into Silicon Valley So for us to source is very different than you know, someone who's not based in Silicon Valley And I think that's where you know groups like Neil if if you're coming in from, you know Tennessee I grew up in Kentucky so I can I can talk about different regions like this But if you're coming in you're just not seeing these companies so it can be a lot overwhelming or if you're coming in from Europe potentially so having someone a You know a guide that can help you navigate and say look these are the conversations We can have we can otherwise you're just you're talking to so many random people Yeah, there's a hundred startups and it's really hard to I think filter the filter what's quality, right? So Is it true though that the underlying kind of interest of a corporate venture fund is an acquisition eventually, you know I mean this is the thing. Yeah, if you're not going with a traditional VC and you're going with the corporate VC Is it not sort of looming always that you could be? Acquired eventually because why else would yeah Salesforce Google Intel whoever wants to be And specifically yes more generally so At Salesforce, it's not so we've made over 250 investments We've had 50 companies that have been acquired We've had nine IPOs. We've only acquired a small handful of companies and Again because of the nature of us being a platform company and having an enterprise Application store we can effectively partner with these companies and get a lot of value out of it Mutually without having to acquire it does give us a lot of insight into the market. It helps inform us But it's very beneficial for both sides I think that you're kind of hitting on the point and what I kept getting back to is like You know, how do you create us a relationship that's mutually valuable for both sides? I don't know what you're seeing with other companies. I think absolutely very much the same right I think you'd find you'd be hard-pressed to find many corporate venture arms who say we're our job is try before you buy Our job is to take a stake because it's going to lead to an acquisition I think you know in many of the cases we're seeing it's we plan to be a big customer of this company You know as a part of that we'd like to invest We have insights into them We have ability to have influence on their product roadmap and by the way, we're going to be a big customer We get to capture some of that upside value that we're creating by the very nature of of you know Writing a 10 million dollar check turns into revenues for them But I think a really important point though is if you think that that is going to be a good acquirer It's better to have that relationship earlier. And I think this is the mistake and and I know there's Very prominent investors. I think who've given companies bad advice It's like don't engage with corporate arms unless you're ready to sell And and I don't know why people would say that because it makes absolutely no sense It's it like when you're doing an acquisition It is like a marriage you're going to be together for a long time A whole bunch of stuff has to work out and if we're not familiar with you If we haven't been working with you and you're like, hey, we're in a sale process You know, we have like we're in prolonged discussions. You maybe have two or three weeks We're not going to buy that company. And so versus hey, we've been working with you our product teams know each other We've done these integrations. Here's how we work in the field our sales teams know one another It's an entirely different discussion And I just think that point is is lost on on Even on Institutional vcs who would say oh don't take corporate. I think that's changed a lot But that was sort of the mantra And in the past is that you might have seen some corporate venture Investments in the term sheet having writer first reveals or whatnot their owners and you won't see it From the most sophisticated corporate venture investors, right from from the corporate perspective. I'm interested to hear this too What's the decision to to to go with kind of a venture capital approach investment versus an internal So ours is internal, right? I mean ours is all off of the balance sheet. I am All right, so it's kind of the internal and I think this is where yeah And I think this is actually where I'm very helpful as I am part of the corporate development team I don't lead mna in acquisitions, but I understand everything that we're thinking about buying And often these conversations we have are very dynamic where I can help fund companies guide companies and help them think through acquisitions if they want us to acquire And often investment conversations will lead to mna mna conversations will lead to investments And it gives us a lot of flexibility in working with companies. Is that is that common? You know or or I think there's a there's a fair few corporate funds that are very very separate Yes, nothing to do with I think that and many of them start as they are You know sole lp or they're straight out the balance sheet and then some of them Raise outside capital sapphire ventures and a few others. I think that's that's rare in the grand scheme You know out of a thousand firms There's probably five or ten that you'd put in that category And on the flip side many start out as a function of corporate development And they're doing opportunistic investments off the balance sheet and they get to a point where they say, you know We should we should formalize this we should we should name it And we should structure in a way that it's obvious externally that this is going to be an ongoing activity and one that has Senior commitment for the long term. Yeah, I think you're hitting on the crux of the challenges You are a corporate venture arm Uh, so there's an expectation that you make money But are you strategic and I feel like what happens is corporate venture arms sort of Are a bit muddied in what their primary objective is we're 100 strategic Google I would say is an extreme. They're you know principally financially motivated I think they do a great job. So it's not a negative on them I think if you're sort of neither here nor there You still have to make returns, but I think if and you know have very proud of our returns But I think if you're Neither here nor there the value that you're kind of a little conflicted And like what's the value that you're trying to provide to those companies you're working with Kind of a follow-up question to that from the from the audience What's what's wrong with having a right of first refusal in a in a corporate investment? Well, effectively it limits your your exit paths, right? It's a signaling effect And so you as the entrepreneur Taking money from an investor that would have that term in is is almost universally a no-no And and the best event, you know institutional investors if they see that term Being applied to a potential new investment, you know, they're going to go a different route. So that's the Yeah downside to a rover if you're an acquirer You're not going to spin up a whole process Just to know that and because it takes a ton of energy and a lot of resources internally You're not going to spin that up Just knowing that this other team that has all the insight and right of first refusal can just like Come in and undercut you at the last minute. Yeah, right So to get you know detailed all these all these wonderful startups around us Is there a different way to pitch a corporate venture fund than there is a traditional fund or or if you're coming out of the Angel round or seed round. I mean, what should they think of if if they decided to go the corporate I think the mistake that we see a lot is someone comes in and says, hey, you're a big sales force like How can you help me and that's a really bad way to start the conversation? And I think it's a it's it's really If if you don't have an idea of how you can help sales force customers We can then You know work with you and figure out how we can best both work together But you know our product managers our sales teams they have a bunch of different products a bunch of different priorities To have us a startup rise to the top of the stack and something that you're going to get a meaningful relationship in the field You need to be able to come and help tell that story And then you know in it in a translate to post investment is that you really have to Really focus and have a team that's that or at least a person that's dedicated to that relationship So you need to you need to have that narrative of like this is what how I can help sales force and sales force can help me Or whatever your corporate is. Yeah, it's it's it's the do your homework Right before you go in and the parallel with institutional vcs right as you look at the fund Look at the kind of companies they've invested in the categories the sectors Which partner has led those investments would be the same thing with a corporate Which is here's how I think I can help your business and in the reverse Here's how I think if you were an investor in my business that I think that you would add value to it Yeah, we we talked a bit about um at the at the beginning throwing out those stats about about how Hot let's say corporate vc is now If a startup is looking to take money from that should they be maybe slightly worried that we're in kind of a faddish Sort of stage now like what happens if you take Corporate venture capital money cycle turns cfo decides like why are we spending money on all these kind of tangentially related companies? like what happens that is that is that part of like the The the founders do diligence that they need to do I think I think it is I mean if you've been in the ecosystem long enough we've seen the movie before I think it's no different than than an emerging manager right a new institutional venture fund And so if you're if it's a corporate who's just announced and launched a new fund You know, you don't know what is the staying power of that fund? What's the commitment to the ceo cfo and the board to it? That's certainly not a concern of the case with the the top You know Decile of corporate venture funds who have been at it for years and years and years In the in the highs and the lows from a macro standpoint, but it's a consideration And also is here's the champion Who's leading my deal and again it would be the exact same case whether or not you're talking institutional and corporate Which is are they going to be around are they going to be my champion? Are they going to be my that's going to be my partner who's helping me build this business, you know in the years to come And that's that's also why we don't lead rounds I mean i'm not worried about Salesforce ventures going away tomorrow But typically I think a healthy relationship. There's exceptions. We do lead from time to time, but corporates a lot of times don't lead so And that's how that's healthy for a whole host of reasons. So if for whatever reason, let's say we invest and You know product pass diverge We lose our executive sponsor the relationship didn't work out how we expected If we're leading and writing a large check and I think this is the case for a lot of corporates And for whatever reason you're not following on that's a really bad signal to the market And so I think and and and on the flip side you can mitigate a lot of the concerns that institutional vcs and entrepreneurs have By when you're working with corporates again There's cases where it does make sense to lead and I'm so I'm not saying you shouldn't but I think that's that's So when you think about different ways to manage the perceived risk of corporates Look at the terms like right or first refusal, you know Should are you going to give them a board seat? Like, you know, that has a lot of issues Are they going to lead so I think you you look at all those things and you can you can manage a lot of that Perceived risk and how you structure the deal and what the role is. It's am I right in thinking it's pretty rare To say raise funds only from a corporate venture capital fund like like you were saying they they tend to Team up with others or with traditional vcs or with other types investors. Is that I think that's right I mean it's less rare today than it used to be but fundamentally it's a syndicate business Right, particularly for the companies who make it on through and end up raising rate of rounds But certainly there's the soft banks of the world and others who are You know taking lead positions taking entire rounds But I think most companies it's part of a diverse syndicate and you've seen also in in financial services and highly regulated industries Where you'll get a consortium of all of the the biggest players or a significant portion of the biggest players to all chip in a A little bit of money and I think that's a healthy dynamic as well And you won't have institutional investors Sometimes I mean that does remind of you know, there is that concern some companies have is I take money from samsung And I've kind of made my bed as an example, right which is I'm no longer switzerland But in a lot of these cases whether it's financial services or telcos You'll see a company take it from two or three or four as a consortium and it's obvious they're working with everybody Right, but on the on the flip side, I would say You know it works in like financial services and some of the regulated industries To take a bunch of money from a lot of corporates The value you're going to get generally again unless you're building some fabric that's going to go across the specific industry If you're taking from a bunch of corporates, you're probably You can't dedicate enough resources to work with all those you probably should in the earlier stages only be working with one or two Maybe three And you need the team and the resources and you also if you're working with a bunch of those Companies as well and you take a bunch of money There's less of an incentive for each of the individual companies too. So there's a there's a bit of a balance Right. Yeah, I mean like we talked about around the pitching the pitch needs to be tailored to the corporate How that's how sales force I can help intel if there's a big group of those it'd be hard to help all those things We we don't have much time left, but I wanted to sort of To kind of wrap up maybe a minute each. This is the kind of overarching question that we have here is you're a founder How do you decide how do you suss whether you want to pursue venture Traditional institutional venture money versus corporate venture funds like, you know in a nutshell What should you know the two three things people think about when they're deciding which route to go? Well, I would say don't take venture capital all unless you have to because it's incredibly expensive and too many businesses Take venture capital that have no business taking venture capital to start with But then I think it's who is the the one or two most strategic Partners in your ecosystem start to develop those relationships early early And then figure out when the right time is to make an investment So it's it's a an extension of the overall partner discussion not it's not an either or it's part of that partnership discussion Right. I completely agree. It's not mutually exclusive. That's the good news Right, and it really is it's mapping out your universe of who could add the most value to your business on the operating side And in terms of the institutional vcs and then going out and targeting with them And whether it's a corporate or institutional vc you start that relationship as early as possible They can follow you and then when it comes to investment or as you were talking about earlier m&a You know each other. You said here's what I'm going to do. Well, here's what I did I did it and then the deal ultimately moves much faster whether that's investment or another outcome Right. Excellent. Thanks. Well, thanks a lot guys. That was a really good way. I think to to start the conference I'm sure you're around and would love to hear from all the startups here Neil helps helps connect big corporates with with startups and Like like we said with matt sales force is is is one of the busiest corporate venture funds out there So i'm sure you have your your tentacles all over. Um, we do the the um the conference here So thanks again matt and Neil and thanks everyone for the thank you. Thanks