On June 8, Orange Silicon Valley hosted its second annual CVC Summit, an exclusive, invite-only event held in our San Francisco office at 60 Spear St. This year, the event’s principal organizer Derek Au set out to gather CVCs, VCs, strategics, and Fab Force partners to discuss how corporate venture capital programs and venture capitalists can best work together, even when they have different underlying goals.
The result was a robust series of conversations and presentations that were both honest and illuminating.
The daylong event was filled to capacity. Representatives came from prominent players such as Intel Capital, Comcast Ventures, Cisco Ventures, Visa Ventures, Industry Ventures, RBC Capital Markets, SVB Capital, Venrock, Salesforce Ventures, Bullpen Capital, Sapphire Ventures, Sherpa Foundry, Greylock Partners, Bessemer Venture Partners, Pivotus Ventures, Next47, and Allegis Capital.
The Thursday summit began with opening remarks from Orange Silicon Valley CEO Georges Nahon, who was followed by Ilya Strebulaev, a professor from the Stanford Graduate School of Business who extensively studied how CVCs operate. Strebulaev explored how unicorns have been overvalued and the kinds of relationship CVC’s have with their corporate parents.
On the subject of unicorns, Strebulaev expressed skepticism over $1 billion valuations and shared survey results that showed 93% of VC’s believe that unicorns are overvalued.
“I believe that half of unicorns will eventually exit, either by IPO, or M&As, or liquidation, at a non-unicorn status,” he stated.
Regarding relationships between CVCs and their corporate parents, Strebulaev said there should be a mix of financial and strategic goals in place and that reporting to corporate parents can bend CVC focus toward financially defined outcomes instead of innovation. “It is a mistake to make the head of CVC report to the CFO,” he said. “There must be a relationship, but not a reporting relationship.”
Other highlights from the day included a talk with Amy Banse, the managing director and head of funds for Comcast Ventures. Banse spoke with CrunchBase’s Gené Teare about the differences between VC and CVC operations and the need for diversity on teams in both worlds. That was followed by a look at C-level perspectives on corporate venture, moderated by Thiel Advisors Chairman and Chief Advisor Fred Thiel. Cisco Senior Director of Investments and Acquisitions Phil Kirk, Intel Capital Managing Director Tami Hutchinson, Salesforce Ventures Director Meredith Finn, and Visa Ventures SVP Avin Arumugam all contributed perspectives.
“M&A is the catch-all, the most expensive way, but accelerates roadmaps,” said Hutchinson. Kirk, likewise, indicated that Cisco sees M&A as a key priority with venture playing a complementary role.
Industry Ventures CEO Hans Swildens led afternoon programming with a look at how corporations should treat early losses in investments.
“If you don’t have at least a 40% loss rate, your portfolio won’t generate the return you were hoping for,” he explained. Swildens also recommended that CVC portfolios should be off the balance sheets for their corporate parent, echoing early thoughts from the day that such relationships can have a negative impact on outcomes.
As for how CVCs and traditional VCs can best collaborate, Greylock Partners Director Jennifer Smith and Bessemer Venture Partners Partner David Wehrs offered some frank thoughts on challenges that need to be addressed as partnerships and co-investments are established. Smith suggested that picking the right partners, cultivating relationships, and actively building trust should be among the highest priorities. The two also suggested that each party can learn a great deal from working with the other, whether it involved gleaning insights about corporate strategy from the VC side or learning about new technologies on the corporate side.
Finally, startup adviser Jay Onda moderated a panel on creating startups that can become successful businesses, with seasoned experts Oren Goldschmidt of Pivotus Ventures, Bob Ackerman of Allegis Capital, and Jason Sydow of Next47. “We are building things that we know are commercially viable,” said Ackerman, elaborating that he sees opportunities in data security and leveraging government innovation to bring offerings to the private sector.
By the end of the day, the scope of opportunities addressed was quite broad. But the idea that useful collaborations can happen between CVCs and VCs seemed to resonate throughout the room. What was evident was that even where skepticism and obstacles may exist, there are also successful outcomes to be found that can benefit stakeholders in both camps, as well as in the young startups seeking funding and advice.