IBM is reported to have put in place a Global Technology Headlight Venture Network to more efficiently monitor emerging technologies around the world and establish relationships with promising startups. The company selects leading VC firms as partners in each of a dozen technology hotspots. IBM further enhances the ROI of its venture network through formalized knowledge sharing activities with market savvy VC executives.
This model is based on the premise that relationships with the best VC firms in any given region provide access to that region’s most promising startups. For a company the size of IBM it requires around 80 VC firms as preferred partners in more than 12 geographic regions around the world. The company then passively invests in projects with about half of those relationships while the remaining are non-equity-based idea sensing arrangements. A network such as this can expose a company to more than 8000 startups in priority technology areas.
From an operation standpoint a local business development officer is assigned each VC partnership. The VC firm, in turn, arranges leveraged introductions between the company and startups within its own fund. This enables the company to promote its own products and technology platforms to small companies that may become tomorrow’s superstars. For technologies that the company may be interested in licensing or acquiring, business development officers are chartered to recommend promising concepts to technology evaluators, senior scientist with appropriate technical expertise, that spend 40% of their time screening the technical merit such concepts. Technology evaluators forward the best ideas to business unit management for right of first refusal consideration.
IBM also utilizes the VC partner network to tap into market insights and business development expertise. At least twice a year, senior scientists from IBM’s central R&D organization present current projects to more than half of the VC firms to obtain feedback on the commercial viability of their own concepts. Additionally IBM executives, ranging from corporate vice presidents to business unit general managers, engage in one-on-one meetings with VC partners to discuss industry trends and learn about specific technology areas.
As a best practice the company maintains a database that tallies financial and strategic gains that encompasses direct revenues from product sales that came through the universe of VC introduced startups; future revenue opportunities for startups in the network based on design integration, adoption of the company’s standards, and intellectual-property licensing agreements; networking benefits measured by the number of executive level meetings with PC partners and VC reviews for assessing the market viability of IBM’s own R&D efforts. The databases is then mined on a variety of dimensions to enable IBM to identify the most or least impactful VC partnerships, regions, etc.