Corporate Venture Capital

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<ul><li> 1. Compaq Computer Corporate Venture Capital March 3, 2001</li></ul> <p> 2. Overview </p> <ul><li>Corporate venture trends </li></ul> <ul><li>Rationale for corporate venture capital </li></ul> <ul><li>Why Compaq invests </li></ul> <ul><li>How to approach a strategic investor </li></ul> <p> 3. Corporate venture capital soars YEAR CORPORATECOMPANIES TOTAL ANNUAL VENTURERECEIVINGCORPORATE PROGRAMS FUNDSINVESTMENT 19954565$370M1999 370 936 $10.8B 2000* 385 1635 $15.7B * Estimate Corporate Venture Capitalgrowth has surpassed the growth in overall VC spending 4. Corporate VC spending Compaq invested approximately $500M in 2000 Source:Venture Economics 5. Typical corporate venture funds </p> <ul><li>Corporate venture funds typically only invest with a major VC; Series B or later </li></ul> <ul><li>Investments meant to supplement or lead global product group strategies </li></ul> <ul><li>Most funds are primarily focused on creating opportunities for their firms to capitalize on technology developed outside the firm - Financial return is secondary </li></ul> <ul><li>Most corporate funds are independent - no other limited partners nor investment banking firms </li></ul> <ul><li>Typical average investments are under $10M </li></ul> <p> 6. Factors driving the trend toward corporate venture capital </p> <ul><li>Outsourced R&amp;D model (Leverage innovation in startup community) </li></ul> <ul><li><ul><li>$103B US VC spending in 2000 vs. $1.7B Compaq R&amp;D </li></ul></li></ul> <ul><li>Need for speed </li></ul> <ul><li><ul><li>Internet driving rapid, fundamental change (Commerce, Entertainment, Education, Government) </li></ul></li></ul> <ul><li>Quest for knowledge of disruptive technologies/industry trends </li></ul> <ul><li><ul><li>Use venture fund as early warning system -Lead product group strategies </li></ul></li></ul> <ul><li>Client cultivator</li></ul> <ul><li><ul><li>Squeezing additional value out of relationship with a client </li></ul></li></ul> <ul><li>Securing sell to, through, or with opportunities </li></ul> <ul><li>Profit motive - ROI </li></ul> <p> 7. Why Compaq Invests </p> <ul><li>Access to technology</li></ul> <ul><li><ul><li>Differentiation </li></ul></li></ul> <ul><li><ul><li>New markets </li></ul></li></ul> <ul><li><ul><li>White space </li></ul></li></ul> <ul><li>Compaq as a technology provider </li></ul> <p> 8. Making a good impression </p> <ul><li>Clearly identify the customers pain </li></ul> <ul><li>How you will solve it </li></ul> <ul><li>What it means for your strategic partner </li></ul> <ul><li>Know your value proposition to your customers, investors and strategic partners </li></ul> <ul><li>Have a dedicated senior person who can build a trusted relationship with the partner</li></ul> <p> 9. When the discussion turns to equity </p> <ul><li><ul><li>Dont lead with this discussion </li></ul></li></ul> <ul><li><ul><li><ul><li>Let the value of the alliance to your partner set the stage </li></ul></li></ul></li></ul> <ul><li><ul><li>Be prepared to discuss why equity makes sense </li></ul></li></ul> <ul><li><ul><li><ul><li>Exclusivity </li></ul></li></ul></li></ul> <ul><li><ul><li><ul><li>Time - to - Market advantage </li></ul></li></ul></li></ul> <ul><li><ul><li><ul><li>Joint product development </li></ul></li></ul></li></ul> <ul><li><ul><li>Control </li></ul></li></ul> <ul><li><ul><li><ul><li>Board seat? </li></ul></li></ul></li></ul> <ul><li><ul><li>Where could the investment ultimately lead? </li></ul></li></ul> <ul><li><ul><li><ul><li>Merger or acquisition </li></ul></li></ul></li></ul> <p> 10. What are we seeking? </p> <ul><li>Something unique, innovative </li></ul> <ul><li>Technology which will help Compaq serve new or existing customers; enter new markets; competitive advantage </li></ul> <ul><li>Products or services that help Compaq differentiate its offerings </li></ul> <ul><li>Differentiating technologies </li></ul> <ul><li><ul><li>Performance, reliability, scalability, availability, cost savings </li></ul></li></ul> <ul><li>Wireless technology and applications </li></ul> <ul><li>Technology to improve the out of box experience for our consumer customers </li></ul> <p> 11. 12. Backup 13. Venture capital investment trends Total venture capital has skyrocketed Average venture investment also increasing </p> <ul><li>Silicon Valley continues to dominate </li></ul> <ul><li>*Venture capital invested in the US</li></ul> <ul><li>was $103B in 2000</li></ul> <ul><li>(2X 1999s amount) </li></ul> <p>Venture Capital Investments by Geography 01/01/2000 through 11/07/2000 GeographyInvestment ($M)% of Investment Northern CA $28,611.031.1% New York $13,072.614.2% New England $8,607.99.4% Southern CA $7,183.87.8% South East $6,484.27.1% South West $6,138.26.7% Mid Atlantic $5,342.65.8% Rocky Mtn. $4,864.65.3% North West $3,244.73.5% Great Lakes $3,204.13.5% Ohio Valley $2,207.32.4% Great Plains $1,935.52.1% South$948.31.0% Alaska&amp;Hawaii $9.50.0% Totals $91,854.2 100% Source:Venture Economics Source:Venture Economics 14. What does a potential partner need to know about you? </p> <ul><li>How much of a risk am I taking on this start-up? </li></ul> <ul><li><ul><li>Can you clearly describe the companys business in 3 sentences - Elevator pitches </li></ul></li></ul> <ul><li><ul><li>What type of relationship are you seeking? </li></ul></li></ul> <ul><li><ul><li><ul><li>Co-Marketing, Discount equipment, Customer, technology licensing, Online services aggregation, product integration </li></ul></li></ul></li></ul> <ul><li><ul><li>What is the possible sustainable value proposition? </li></ul></li></ul> <ul><li><ul><li>Who are your competitors, customers, partners? </li></ul></li></ul> <ul><li><ul><li>What is your key competitive advantage? </li></ul></li></ul> <ul><li><ul><li>What stage of financing are you in? </li></ul></li></ul> <ul><li><ul><li>What are the firms revenues/business model </li></ul></li></ul> <ul><li><ul><li>What is the path to profitability </li></ul></li></ul>


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