Wharton Field Challenge Corporate Entrepreneurship Dina Saginur Shelby

Wharton Field Challenge Corporate Entrepreneurship Dina Saginur Shelby Zitelman MIF – IADB 20 th July 2007

Outline Innovation n Venturing Matrix n Investment processes n The Venturing Corporation n Setting up a venturing unit n Macro-level impact: 3 pillars of VC n Case study: Air Products n

The Innovation Toolkit New Product Development Internal M&A Corporate Intrapreneurship Corporate Venture Capital Spin-off / Licensing Alliances External © Gary Dushnitsky…Wharton Entrepreneurship Conference 2006

Intrapreneurship Corporate VC External Internal Venturing Matrix n. Window on technology n. Means of business diversification n. Entrepreneurial culture n. Synergies between existing and new businesses n. Increase n. Licensing n. Traditional n. Technology agreements n. Window on technology n. Scope the market Strategic Dushnitsky and Lenox (2005) sales n. Quarterly earnings n. Spin-offs VC compensation n. Return on investment n. Diversify investment portfolio Financial

Investment Processes n Corporate Venture Capital Create investment guidelines n Identify Choose venturing opportunities vehicle Managerial support Exit Corporate Intrapreneurship Create investment guidelines Identify venture opportunities Incubation Spin-off/ Transfer to BUs Set up a Corporate Venturing Unit to do both.

The Venturing Corporation Internal External M&A Corporate Headquarters Exec. Board VC Partnership Joint Venture $ BU 1 BU 2 BU 3 BU 4 Corporate Venturing Unit Ideas Start-Up Ideas Transfer Venture 1 Venture 2 Venture 3 Spin-off

Basic Requirements to set up a Corporate Venturing Unit n Staffing ¨ Small and diverse ¨ Led by long-term employee n Governance ¨ Reporting ¨ Executive n relationship board oversees unit Compensation and incentives ¨ Corporate Venture Capital: different options ¨ Intrapreneurship: n Reward people for taking on risks n Potential for future leadership in new ventures n Culture of innovation

How Does Corporate Venturing Help? PILLAR 1 Technology and Market Opportunities n n n Create discourse and conversation Map out where the opportunities are Help develop entrepreneurial mindset NEW EMPLOYMENT OPPORTUNITIES PILLAR 2 Capital Market n. Corporations create synergy by linking intrapreneurs and external VCs n. Corporations integrate intrapreneurs’ solutions or monetize through spin-offs by leveraging external VC capital WEALTH GENERATION PILLAR 3 Legal/Political Environment n As more entrepreneurs and VC funds engage in investments, this will spur government legislation MORE SUPPORT FOR ENTREPRENEURS

Case Study: Air Products n n $9 billion in gases and chemicals worldwide Innovation-driven, strategy-driven company: ¨ Corporate Technology Partnerships ¨ Investments in VC funds ¨ Member of Corporate Strategy Board n New Business Development Group ¨ Created in 2001 ¨ Long-term strategic focus ¨ Growth board for governance ¨ Example: lithium batteries for hybrid cars Interview with Dr. Ron Pierantozzi, Director of New Business Development (rpierant@wharton. upenn. edu)

Air Products Best Practices and Recommendations n n n Start small Invest in VC funds to learn from the experts Long-term view necessary Strategically-driven Importance of distinct structure Dealing with uncertainty: ¨ Discovery-driven planning (I. Mac. Millan) ¨ Discrete investment decisions ¨ Learning process n Promote an entrepreneurial culture ¨ Innovation College Interview with Dr. Ron Pierantozzi, Director of New Business Development (rpierant@wharton. upenn. edu)

Conclusion n Takeaways: ¨ ¨ ¨ n Benefits for corporations ¨ ¨ ¨ n Strategic > financial Create distinct unit to handle corporate venturing Combine internal and external practices Innovation Technology Entrepreneurial culture Societal impact ¨ ¨ ¨ Development of VC market New employment Wealth generation