Jan 2, 2019 · 31m · a16z
a16z Podcast | On Corporate Venturing & Setting Up 'Innovation Outposts'
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of the a16z Podcast, venture capitalist Evangelos Simudis joins Sonal Chokshi and Michael to discuss how large corporations can successfully navigate corporate venturing, avoid 'innovation theater', and integrate startup playbooks to foster long-term innovation.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. The host holds 17.2% of the talking time here. How this is scored →
The host as informed peer 4.7 Guest teaching 4.6 Guest disagreement 2.0 The host pushing back 3.1
speaking balance: gold is the host, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 29:54 Calling Silicon Valley auto disruption a fallacy
Evangelos forcefully rejects the Silicon Valley consensus that tech companies will completely obliterate Detroit automakers, calling that assumption a fallacy.
Hardest push from the host ▶ 24:34 Challenging corporate AI vs. startup advantageSonal refuses to accept the premise that legacy corporate platforms like IBM Watson can compete effectively against nimble startups and data-rich tech giants like Google and Facebook.
Biggest teaching moment ▶ 11:05 Reframing legacy materials industry digital threatEvangelos directly corrects Michael's assumption that materials companies enter software out of speculative interest, clarifying that software, data, and 3D printing had already disrupted their core market.
The host holds their own ▶ 26:22 Raising NIH syndrome as structural barrierSonal demonstrates strong expertise by introducing Not Invented Here (NIH) syndrome to highlight the cultural inability of legacy corporations to absorb external startup innovation.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The host as informed peer | Guest teaching | Guest disagreement | The host pushing back | Why |
|---|---|---|---|---|---|---|
| Innovation Outposts vs. 'Innovation Theater' | 3 | 4 | 1 | 2 | Sonal asks structured questions on distinguishing genuine innovation outposts from 'innovation theater', citing DARPA and Amazon. Evangelos explains why corporate venture funds often fail to secure quality deal flow without true executive engagement. | |
| Ecosystem Sensing and the Five Response Types | 4 | 5 | 1 | 1 | Sonal cites research on corporate decision-making slowdowns, prompting Evangelos to detail the ecosystem sensing model and five response types. The hosts collaboratively expand on the guest's points with earthquake sensor analogies. | |
| Historical Evolution of Corporate Venturing | 4 | 6 | 3 | 3 | Evangelos shares historical data on 1990s corporate venture failure rates and reframes Michael's question about materials companies. He pushes back on Michael's premise, noting software was already impacting their business rather than being an optional pivot. | |
| Redefining Corporate Structure through Outposts | 5 | 4 | 2 | 4 | Hosts demonstrate knowledge of declining S&P 500 company longevity and SaaS transition friction. Sonal directly pushes back on whether an outpost has ever successfully become a company's main center, prompting Evangelos to clarify its role as a transformation agent. | |
| Case Studies in Corporate Transformation | 6 | 4 | 1 | 2 | Evangelos analyzes case studies including Alphabet, BMW iBrand, and IBM Watson. Sonal displays expertise by citing Astro Teller's framework requiring 10x improvement and current feasibility signals for moonshots. | |
| Open Innovation and Competing with Startups | 7 | 4 | 3 | 7 | Sonal offers her strongest pushback of the interview, questioning how legacy efforts like IBM Watson can compete with agile startups and data giants like Google or Facebook. She extends her critique by introducing Not Invented Here (NIH) syndrome as a major obstacle. | |
| Long-Term Risk Management and Silicon Valley Collaboration | 4 | 5 | 3 | 3 | Michael asks what Silicon Valley can learn from legacy corporations. Evangelos dismisses the Valley's belief that tech companies will completely obliterate Detroit automakers as a fallacy, arguing for genuine two-way collaboration. |
Statements from this episode (14)
Simudis: Corporate venture funds do not guarantee high-quality deal flow
“Just because you're establishing a fund, it doesn't mean that now you're going to start seeing a tremendous deal flow and the right deal flow”
Simudis: Capital alone does not make corporate VCs valuable to startups
“Just because you have a venture fund and just because you're willing to spend some money doesn't mean that you become a value add partner of a startup or of a group of startups.”
Simudis: Corporate outposts require continuous executive engagement to succeed
“The ones that have a particular reason, they're trying to solve a particular problem, They have engagement from the highest levels of the corporation. It's not only anointment, but there is actually engagement on a continuous basis. They are the ones who are p…”
Simudis: Corporations should build business development before launching venture groups
“90% of the times is to establish a venture group. And in retrospect, we determined that maybe establishing a venture group wouldn't have been the right first step. Maybe they should have established a business development capability before they even think abou…”
Simudis: Half of 1990s corporate venture arms closed by 2003
“So back in in the late nineties and roughly between nine, 90 seven, 98 and 2000, there were roughly 500 corporations that had established venture groups in our area. And of those 500 by 2003, 50% had closed down.”
Simudis predicts 50% of corporate VC arms will close next recession
“Now by, I would call them unofficial statistics, there are Roughly a little over a thousand corporations, which in a sense makes sense because many more geographies have opened up in the intervening, you know, 1015 years, and I wouldn't be surprised if we have…”
Chokshi: Legacy companies struggle to become SaaS due to organizational structure
“One of the theses that we've put forth is that it's actually very difficult for a non-software-as-a-service company to actually become a software-as-a-service company because it requires completely re-architecting everything from the ground up, from your sales…”
Simudis: Corporations must learn rapid, low-cost experimentation from Silicon Valley
“What can a corporation take away from Silicon Valley or from any other innovation ecosystem is not the fact that you come into touch with Two or three or 10 startups is the fact that there is a set of now best practices, and one of these that you can take away…”
Simudis: Alphabet successfully integrates corporate venture arms with core operations
“For me, a very interesting example is what Google is doing with Alphabet. And the reason I find this interesting is because you're seeing their venture capital groups working in tandem with their, the rest of the corporation.”
Simudis: BMW structured iBrand separately to pursue new mobility services
“Another example is BMW's iBrand, an organization that has been set up very differently from the major business units of BMW trying to look at not only the manufacturing aspect, the design and manufacturing aspect of the car, which is what BMW and other automak…”
Simudis: Corporate moonshots that go exactly as planned lacked sufficient risk
“And when you're, our point is that when you are involved in moonshots, not everything is going to go as planned. And if it goes as planned, it means that you didn't take enough risks.”
Simudis: Large corporations cannot solve complex innovation challenges with capital alone
“In this environment, regardless of how much capital they want to throw at the problem and how big and how good they are, they cannot solve things on their own, and they need to co-innovate.”
Simudis: Co-innovating with peers helps corporations adopt startup-driven innovation
“Steve and I are finding that corporations that have adopted open innovation principles, where they are co-innovating with other large corporations, are becoming more successful At adopting startup driven innovation.”
Simudis: Silicon Valley tech companies will not completely overtake the auto industry
“There's also a lot of enthusiasm in the Valley from our own companies that we can completely overtake the automotive industry, and I think this is a fallacy. Completely obliterating it and making Silicon Valley the, you know, the next Detroit, it's hard for me…”