Anis Uzzaman (アニス・ウッザマン ) is the General Partner & CEO at Pegasus Tech Ventures | Chairman of Startup World Cup.
Corporations around the world struggle to innovate and maintain a robust growth strategy. Innovation is critical to growth because any corporation must understand what the market demands and how to meet that demand with new products or services. In my experience, one of the best ways for corporations to grow consistently is to invest in startups. This is how they can find the most innovative ideas around the globe and put them to use to enhance the corporation’s growth strategy. Let’s learn how to make this happen.
The Evolution Of Innovation
Seeking innovation is not new in the corporate world. Historically, many companies have fostered innovation in-house. At IBM, for example, traditional research and development take place in the company’s Almaden and Watson research centers, which employ hundreds of scientists.
Almaden is IBM’s innovation lab based in Silicon Valley. Engineers, mathematicians, physicists and chemists work together to develop breakthrough technologies. This happens across sectors, such as quantum computing, cloud storage, artificial intelligence (AI) and machine learning.
IBM Watson is a suite of AI services and applications developed by IBM and named for Thomas J. Watson, the company’s first CEO. The suite’s capabilities are diverse and encompass natural language processing, machine learning, data analysis and more. Some of its key features include:
Natural Language Understanding
Watson can understand and interpret human language, enabling it to process unstructured data such as text, speech and images.
Machine Learning
Watson uses machine learning algorithms to analyze large volumes of data, identify patterns and make predictions or recommendations based on that analysis.
Data Analysis
Watson can process and analyze structured and unstructured data from various sources, including databases, documents, websites and social media.
Open Innovation
Another way that corporations try to grow is through open innovation. This typically means partnering with top universities. Stanford University, for example, played a significant role in the formation of Silicon Valley through its collaboration with corporations and its supportive environment for entrepreneurship and innovation. This included the following:
Research Collaboration
Stanford has a long history of fostering collaborations between its faculty, students and industry partners. Several large corporations established close ties with Stanford in the mid-20th century, collaborating on research projects and providing funding for academic initiatives.
Technology Transfer
Stanford actively encouraged the commercialization of research findings and the transfer of technology from academia to industry. In the 1950s and 1960s, Stanford’s Office of Technology Licensing was instrumental in facilitating the licensing of university-owned patents to corporations, providing a pathway for innovations to reach the marketplace.
Alumni Entrepreneurship
Graduates from Stanford University’s engineering, business and computer science programs founded many of the region’s pioneering technology companies, such as Google, Cisco and Yahoo.
Corporate Growth Today
The pace of innovation is speeding up, and historical methods used by companies like IBM as well as university partnerships may no longer be sufficient for corporations to grow. From my perspective, innovations are typically relevant for only 12 to 18 months, so the industry needs to move more quickly compared to the past. Today, many corporations are turning to startup investments to become more innovative and expedite their growth.
Corporate venture capital (CVC) has become critical to corporate innovation strategies. It helps power innovation by tapping into startup knowledge, rather than trying to develop innovation internally or through partnerships. Since setting up an investment organization is difficult, corporations often can get a better return on investment by using the venture capital-as-a-service model (VCaaS). This outsources corporate investments by capitalizing on the expertise of experienced venture capital (VC) firms.
Advantages Of Venture Capital-As-A-Service
By partnering with an experienced VC, corporations can invest in startups effectively. The corporate investor shares its strategy, time frame and investment budget with their VC partner—who then uses its expertise to find relevant startups for potential investment. VCs know how to determine the value of a startup’s technology and conduct due diligence to help ensure that investments will have a positive financial return.
VCaaS provides corporations with an effective growth strategy while hedging their risks. Corporations that invest in startups can also benefit since it allows them to evaluate companies and cherry-pick the best ones for potential mergers and acquisitions (M&As). For example, Google invested in Nest—an innovative startup that develops smart devices to give homeowners more security and peace of mind. Other interesting acquisition examples include:
Facebook’s Acquisition Of Instagram
In 2012, Facebook acquired Instagram, the popular photo-sharing app, for approximately $1 billion in cash and stock. Facebook’s acquisition of Instagram enabled the social media giant to strengthen its position in the mobile space and expand its user base, while also integrating Instagram’s features and technology into its platform.
Google’s Acquisition Of YouTube
In 2006, Google acquired YouTube, the leading online video-sharing platform, for $1.65 billion in stock. YouTube revolutionized the way people consumed and shared videos on the internet. Google’s acquisition of YouTube allowed the tech giant to enter the online video market and leverage YouTube’s massive user base and content to enhance its offerings in online video advertising and streaming.
Microsoft’s Acquisition Of GitHub
In 2018, Microsoft acquired GitHub, a popular platform for software developers to collaborate on and share code, for $7.5 billion in stock. GitHub is known for its innovative approach to code hosting and developer community-building. Microsoft’s acquisition of GitHub aligned with its strategy to strengthen its presence in the developer tools and cloud computing markets.
The Future Of Innovation
Innovation is not easy, but it is important for corporations that want to get ahead and grow effectively. While historical innovation methods worked at the time, now it’s critical to consider what strategies work in today’s business environment. I believe that venture capital-as-a-service is the most cost-effective way for corporations to achieve innovation and growth goals without excess risk. Corporations should not wait to explore startup investing to avoid missing out on the innovation and growth that they are looking for.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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