From R&D to ROI: SPARK Venture Capitalists Tell All
One of the most compelling things about Urjanet’s annual SPARK conference as a whole is its cross-industry, multidisciplinary involvement. In the Venture Capitalists Tell All discussion, panel attendees were invited to learn how venture capital not only varies across different industries, but across different types of firms altogether. Panelists from Oak HC/FT, GE Ventures, UPS Venture Investing, and Cox Enterprises demonstrated that venture capital can take many different shapes and have fundamentally different strategies or objectives.
Patricia Kemp, General Partner, Oak HC/FT, set the parameters for ‘typical’ standalone VC funds; her firm, Oak HC/FT, is a “fund of funds” with approximately $1.1 billion under management that focuses on early stage and growth stage investment in post-revenue ventures, primarily in healthcare and financial technology. Like most standalone VC funds, Oak HC/FT’s primary goal is to generate a healthy and consistent ROI on capital under management, generally aiming for 3x-10x returns.
This is a stark difference from some of the corporate investment strategies presented by other panelists. Rimas Kapeskas, Managing Director, UPS Strategic Enterprise Fund, UPS Venture Investing, currently deploys $40-$50M annually in what are typically pre-revenue companies, with the goal of accelerating growth. Kapeskas was quick to put that $50M worth of investment into the context of UPS as an organization generating $60B in revenue annually, explaining that there is not an expectation for his investment organization to have a radical bottom-line impact on their overall balance sheet. Rather, he described the strategy at UPS as “outsourced R&D” that helps UPS maintain an intimate pulse on innovations in logistics and other technologies critical to operations at UPS, rather than generating an immediate return on investment.
John Spirtos, Managing Director, New Business Creations, GE Ventures, presented yet a third strategy that incorporates aspects from both institutional and corporate venture capital, with GE Ventures mobilizing internal capital as well as third party investments. Spirtos described GE’s strategy as a typical “barbell” approach in which GE seeks measurable ROI from its fund in the short run in addition to knowledge and technology superiority in the long run. GE Ventures does diligence on approximately 4,000 companies per year, primarily making investments in energy, energy optimization, machine learning, and AI.
Cox Enterprises, much like UPS, is a longstanding company with substantial revenues and profits from its standard business operations. Duncan O’Brien, SVP and GM of Corporate Strategy & Investments, explained that Cox has recently been increasing its venture capital investments, and similarly to UPS it is not with the goal of significant change to the balance sheet bottom line. Rather, O’Brien explained that it is first and foremost a learning and education strategy for Cox, which in fact drives much of its investment to verticals and areas that Cox has less expertise in than others. This has manifested in the form of Cox investments into healthcare, IoT, and blockchain technologies, and enables Cox to stay on the cutting edge of technology in its own industry as well as adjacent industries.
The big takeaway from this session was clear — venture capital initiatives can have a wide range of goals and definitions of success. The most effective venture capital initiatives give a substantial amount of consideration to the context of investment capital within the organization before setting those goals. Regardless of whether the goal is ROI or R&D, setting clearly defined goals that drive primary business initiatives enables venture capital to be effectively managed and mobilized.
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About Amy Hou
Amy Hou is a Marketing Manager at Urjanet, overseeing content and communications. She enjoys writing about the latest industry updates in sustainability, energy efficiency, and data innovation.