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Corporate Venturing for Asian Corporations

The partners at TransLink have started and led the corporate venturing activities in the US for leading Asian Corporations, including Samsung, SOFTBANK, Foxconn, UMC, and Hikari Tsushin.  We are happy to share our experiences and thoughts on how Asian Corporations should think about and implement their corporate venturing activities in the U.S, especially Silicon Valley.

Asian Corporate Venturing History

Corporate Venturing has long been considered one of the widely used methods to implement “Open Innovation.” Open Innovation simply states that, in this rapidly evolving information age, companies cannot rely solely on internal R&D efforts. They need to collaborate with external parties to maintain competitiveness.

Any level of collaboration between an established company and start-up has always been challenging but even more so for Asian corporations trying to collaborate with early stage US technology start-ups. Many of the factors which have made the Asian corporations successful, such as top-down management and discipline, make collaboration with nimble and aggressive US start-ups even more difficult.

Asian corporations have been actively developing their corporate venturing efforts since the late 90s. Early entrants included the Japanese trading companies and Korean conglomerates.  Those efforts were led by expatriates parachuted in from corporate headquarters. Looking to partner with the local VC community and start-ups, they would initially “commute” from HQ to Silicon Valley. Over time, they would gradually establish local offices.

However, most of these efforts were not sustained. Many expatriates who were stationed locally would be called back to HQ after three to five years, and whatever network they had built would have to be reestablished by their replacement. Furthermore, many of the expatriates lacked experience in working with and investing in the US and US start-ups resulting in a slow learning curve.

Samsung and SOFTBANK Breakthrough

After twenty years, we have now seen a few cases of success from a few leading Asian Corporations such as Samsung and SOFTBANK.

Samsung started their corporate venturing efforts in 1999, establishing Samsung Venture Investment Corporation. In 2003, the firm opened their US office in Silicon Valley, Samsung Ventures America. Since then have launched two more early stage funds, Samsung Catalyst and Samsung NEXT. Samsung Ventures is now considered as one of the most active corporate venture groups globally.

SOFTBANK, even before creating the $100B Vision Fund, has been active in venture capital in the US since 1997 when they established SOFTBANK Venture Capital. SOFTBANK also created the SOFTBANK Asia Infrastructure Fund in collaboration with Cisco Systems and has continued to be an active investor globally. SOFTBANK’s Vision Fund is considered a game changer for the entire industry.

These corporations have demonstrated that despite being based in Asia, their persistent presence, local adaptation, and active deal-making have made them into leading corporate investors globally.

Alternative Approaches to Consider

The reality, however, is that not every Asian corporation can operate their own teams and funds locally in the US.  From our experience prior to TransLink where each of the partners led the corporate venturing efforts for Samsung, SOFTBANK, Foxconn, Hiraki Tsushin, and UMC, the effort and resources it requires to operate dedicated teams in the US is non-trivial and expensive.

Hiring experienced local talent is challenging and retaining talent is even more difficult.  Most experienced investors would prefer to work in traditional venture capital firms or US-based corporate venture firms rather than the US venture arm of an Asian corporation. The cost of operating a local team in Silicon Valley is also substantially more expensive than most other locations – annual budgets for even a barebones team can easily exceed $1M per annum.

For any Asian Corporation considering to establish their corporate venturing activities in Silicon Valley, there are 3 alternatives to choose from:

  1. Build out your own team (e.g., Samsung, SOFTBANK)
  2. Collaborate with a local fund with a smaller team (e.g., Hyundai Motors)
  3. Outsource your corporate venture capital team in partnership with a local fund or multiple funds (e.g., KT, Naver)

There are pros and cons to each approach. If it is not the right time for Option #1, to build out your own full team, Options #2 and #3 are strong, viable alternatives to consider.

Collaborative Venture Model with TransLink

In the case of Hyundai Motors, they launched Hyundai Ventures in 2011 in Silicon Valley with a small team of auto industry experts and also invested in TransLink as an IT industry-focused venture capital partner.  For KT, they exclusively invested in TransLink as their Silicon Valley partner for front-end deal sourcing while focusing their internal resources on partnership development.

Both partnerships have resulted in multiple co-investments with TransLink such as SoundHound, the leading voice-enabled AI company.  SoundHound has raised capital from Hyundai Motors and KT as well as numerous other strategic investors including Samsung, nVidia, HTC, Naver, LINE, Nomura, Sompo, Recruit, Tencent, Daimler, Midea, and Orange.

We believe that a well-established local partner in Silicon Valley can help new corporate entrants from Asia establish a stronger network, recruit local talent, and learn quickly how things are done.  TransLink hopes to continue to build our reputation as the go-to partner for Asian corporations initiating or expanding their corporate venturing activities in Silicon Valley.

Author

Jay Eum

Jun 01, 2018