Corporate venture capital to boost business growth
THE trend of corporates investing their money in startups directly or through venture capital (VC) in order to add value to their company is growing steadily in today’s world.
Rubicon Venture Capital general partner Andrew Romans (pic, right)explains the structure of corporate venture capital (CVC) for corporates and startups during his presentation at the recent Global Venture Summit 2017 (GVS).
“Corporate Venture Capital is extremely important to emerging the markets as it can contribute the best to economy growth,” he says.
He also encourages big corporates to allocate some money every year for CVC and reach out to startups because it can help the corporates to access innovation.
“Some startups have the best Artificial Intelligence (AI) systems and innovation to technology. This can create opportunities for corporates to bring technology into the company,” he explains.
Romans also said that CVC could boost the growth of a corporate’s top line revenues, lower expenses, increase bottom line profit, drive mergers and acquisitions by building a pipeline of investment opportunities, and diversify products and services.
As for startups, CVC increases the opportunities to grow their businesses with large companies and distribute or sell their products or services to the corporate’s customers as well as boosts sales.
“Startup own the fastest access to large companies and customers. At the end of the day, revenue will grow and they will get references that lead to blue chip companies,” he adds.
Romans advices startups to list down all suitable corporate, obtain the necessary information, and be open with your concerns regarding the corporate’s conflicts of interest.
Romans breaks CVC into three types -- purely a fund of funds investors, direct investments to startups, and investment to VC funds that then make direct investments by cherry picking the best deals from the VCs that corporates invest in.
Local CVC to boost the economy
Metra Digital Innovation (MDI Ventures) is a corporate venture capital initiative by Telkom Indonesia, the largest telecommunications company in Indonesia.
Based in Jakarta with operations in Singapore and Silicon Valley, MDI Ventures is an independent entity with its own funding processes.
MDI Ventures uniquely combines a VC model with services by providing companies from Telkom Group with access to operational assistance and help in building startups’ growth engine after making a ?nancial investment by operating with Indigo Creative Nation as startups incubator.
MDI Ventures chief executive officer Nicko Widjaja (pic, above) explains how CVC can build a strong synergy impact upon bringing together innovators (startups) with top tier investment in GVS 2017.
Nicko believes that CVC helps corporates with market expansion, corporate transformation in terms of access to new talent and exposure to the startup culture, technology acquisition, and financial gain from capital gains of investment.
“CVC is not only building relationships between startups and corporates, but also to transforming corporates to dive into the culture of startups. As an investment firm, we really want to transform the culture by the help of technology,” he says.
For startups, Nicko makes sure that MDI Ventures, as the VC, always offers ‘hands-on’ experience to enable them to connect with Telkom and grow.
MDI Ventures has received Series A as well as Series B funding and now has US$140 million in total funding.
Nicko elaborates on how one startup under MDI Venture, Kata.ai developed synergies with Telkom’s go-to market ecosystem called Infomedia.
Infomedia is a subsidiary under Telkom that runs a business outsourcing process.
Kata.ai is a startup that provides AI-powered chatbot platforms in Indonesia, connecting brands and businesses with their customers through commonly-used messaging channels.
Before it worked together with Kata.ai, Infomedia only provided phone call services to customers, resulting in high operational costs and the revenue which solely depend edon calling fees.
After the collaboration with Kata.ai which offered them technology and access to the startup culture, Infomedia now provides multi-channel customer services which are not only reached via the phone, but also through SMS and messaging on chat application. The revenue has been generated from subscriptions and transactions ever since.
“We become the match-maker between startups and companies. Last year, the total synergy that we got reached US$ 12,000,000 in additional revenue and cost saving,” Nicko says.
Nicko is sure that collaborations between corporates and venture capitalists who help to connect them with the startups, and the startup itself will build a meaningful network and connection to Tier-1 investors to build their reputations as thought leaders, build significant commercial value add, and strike a balance between gain and synergy for portfolio construction.