Podcast #153 Purpose-Driven Investing

KEN: Good day, and welcome to Episode 153 of our Momenta Digital Thread Podcast series. Today. It's my great pleasure to welcome Jay Onda. Corporate Venture Capital Advisory Board member for the National Venture Capital Association, Jay has been at the forefront of innovation, technology, and design for nearly two decades. He was a founding member of the Corporate Innovation and venture practice at Yamaha Motor Ventures, was instrumental in evolving NTT Docomo's R&D group to become an open innovation platform, sourced multiple unicorns for NTT Docomo Capital, and pivoted an Innovation Outpost to unlock strategic value creation for Orange Silicon Valley. He has worked with corporations and governments globally to inspire, teach, and coach organizations looking to embrace innovation-best practices. He has a deep passion for usability and user-centric design and has used this to help scale innovation in multinational corporations and accelerate startups. Jay, welcome to our Digital Thread podcast.

[00:01:41]

Jay: Hello, thank you for having me.

[00:01:42]

Ken: Ah, so good to have you. I know you, and I had a chance to interact years ago. I am so pleased to be able to have you on this podcast because finally. We love this intersection of corporate and innovation - Corporate Venturing if you will, and you've been a leader in that. I always like to start these thoughts to talk about one's journey in what we like to call the digital thread. So what would you consider to be your digital thread? In other words, one or more thematic threads that define your digital industry journey.

[00:02:23]

Jay: The common thread throughout my career has been focusing on the experience. Whether that's user experience and product design or customer experience, really taking this human-centric approach to solving a problem. That's been this common thread for every role that I've taken, both on the startup and corporate innovation and venture sides. In my younger days, I saw this ABC Nightline segment about the ideal shopping cart design process, and they documented how IDEO does product design. They look at problems from various perspectives while iterating on their approach. And that was this 'ah ha' moment unbeknownst to me at that time, but it became this inspiration to my approach today. Through the phases of the startup lifecycle- I've been on early-stage ventures and trying to understand how we pitch our vision to the investors, how we sell this to our enterprise customers, and how to work with the engineering team to break down these visions into manageable milestones. All of this centers around the experience in creating this right experience so that we could create that excitement and buy-in and trust. I appreciate this user-centric or human-centric design element because it centers around everything I've done thus far.

[00:03:48]

Ken: I like that as well. Call it a general aesthetic, if you will, for innovation, business, and startups, and I've dealt with a number of very sharp people who came from that kind of design, aesthetic background, and the ability to see the patterns broader pretty cool. Your profile, what I found very interesting, really kind of seems to be you're operating at the bend of what I'll say corporate venturing, innovation, and startups. What does corporate venturing mean to you, and how do you see it interacting or intersecting with innovation and startups?

[00:04:29]

Jay: Corporate venture is one of the tools in the innovation toolkit. And so, how you leverage venture depends on your strategy and what you've set to accomplish. There's this interesting data from the global corporate venturing group. The reports show that the capital deployed, and the new corporate venture entities created have been growing year over year, almost 5X over the last decade. When we look at why the majority of them, we're looking to find strategic opportunities for their parent company as well as financial returns. There's an amusing data point in the book "The Corporate Innovation in the 5th Era" by Matthew La Mer and Allison David. And they surveyed C-level executives on where the next important innovation from your industry will come. So is it a., your company b., your industry or c., outside your industry? Can you care to take a guess?

[00:05:33]

Ken: I would have to expect that it's going to come from outside in as a PNG, you still like to say.

[00:05:38]

Jay: Less than 1% says it comes from your company, and there's roughly a 50/50 split between your industry and outside your industry. This just indicates that the corporate sourcing innovation from the outside, whether it's new technologies or new businesses or building relationships with startups, and in other corporate and tangential industries, they're externalizing their innovation efforts or their R&D efforts. And so, corporate venture acts as a bridge. On the business side, corporate invests to gain access, tapping into talent, key in gaining insights on how new markets are evolving or new customer segments. And on the other side, startups also gained access to the corporate strings, whether it's a new market or their existing customer base, different types of relationships, technical expertise, etc. So, when the corporate innovation strategy alignment is designed and executed correctly, this partnership becomes a two-way bridge. Each has something unique to offer. Both have huge potential gains, and this is where I think it is fascinating how corporate innovation has evolved, leveraging venture to work with startups.

[00:06:55]

Ken: We'll talk in a moment. Indeed, I'd like to go down this when it's done right, right? As you mentioned, when it's done correctly. What I also like about your background, though, is that you also have operated at the intersection of the US and Japanese business culture - given your background with the NTT Docomo, Yamaha as an example- and so I'm kind of curious as to how would you characterize the difference in the approach to corporate venturing and perhaps innovation between generally I'll say East and West?

[00:07:31]

Jay: Sure. So, as you can imagine, the business cultures between Japan and the US are quite different. And so stereotypically speaking, the Japanese corporations are more risk-averse, require consensus for decisions. The delay that decision-making speed, right? But that doesn't change the speed of how the Silicon Valley venture ecosystem works, and so there's a mismatch in personalities, and there's also a mismatch in how to work together. And so, over time, the Japanese CVC is- if they want to get into the round, they have to evolve from their existing mindset. As we know, venture capital is a business of relationships, especially in Silicon Valley, your reputation matters. And so, we're seeing these innovation outposts and CVC groups being formed in the US, a little bit outside of their corporate walls so that they could react and build the right relationships within the ecosystem correctly. I often have a conversation with first-time multinational corporations coming into Silicon Valley saying, 'Well, this is our brand. This is who we are. People should come to us. And I said no, no, no. That doesn't work in Silicon Valley. When we sit down at the table with the founder, early-stage or not- we have even power, right? We're here. We're talking face to face, eye to eye, and trying to figure out how we work together to create that win-win. That's the behavior that has to change, that's the mindset that has to change, and it's really hard to execute overseas. So, you need a team here locally to kind of conform to the Silicon Valley norms. And then, of course, do a lot of the heavy-lift internally to ensure they could execute correctly. So, trend-wise, what's interesting is that about half of the US-based deals with CVC participation have Japanese corporates on their cap table, either directly or indirectly. This means that the groups- these types of groups, as mentioned, are gaining autonomy in their decision-making criteria. And maybe this is becoming less strategic, but again, they've done this heavy lifting early on to create that strategic alignment before that transaction was made. What was different was Docomo was structured as a single- LP fund. The way we source and evaluated deals was different from Yamaha, which was off-balance-sheet initially. But whichever way in both situations, I had to arm myself with the value proposition that our corporate parent can bring to the table, right? Because we are looking to create that strategic relationship. We want to be a value-added partner, and this was one of the ways that we've gained that trust with the startup companies and their investors so that we could participate in their round.

[00:10:34]

Ken: This is such a fascinating space because Japan, in particular in Asia in general, has a- I'll call it an evolutionary partnership approach. And what I've seen is you start with commercial partnerships, and you move to investment. Then maybe move to a joint venture and ultimately, perhaps an acquisition where stereotypically the West can move from 'Hey, I like these guys' to acquiring them overnight, right? But it always seemed this kind of- you slowly build up the relationship, and you build up the trust, right? And so, it is a bit different in that regard. I love your stat about the number. I'll call it the ownership or investment by Japanese companies across the board because they're pretty much everywhere, right? And it's very influential in that regard. So, you've served on this corporate venture capital advisory board for the National Venture Capital Association since 2018. I think I saw that you were named among the top 100 Rising stars on corporate venture capitalists along the way as well. Can you tell us a bit about the organization and what some of the key topics are these days for corporate venture capital?

[00:11:52]

Jay: Sure, absolutely. The NVCA advocates for public policy that supports the American startup and venture ecosystem. They serve the venture community as a trade association and service the community for success by providing resources, data, education, and networking. I serve the CVC Group and co-lead a CVC Mentor Studio program, a peer-driven program for CVC Professionals. And here we have this closed forum, essentially for CVCs, to share, learn and discuss best practices. Talk about tactical tips and tricks and other topics that create success in corporate ventures. As mentioned earlier, CVCs are looking for strategic and financial returns. Now where they would sit on that spectrum varies, but their mandates and efforts look different from institutional VC. And venture capital is an apprenticeship business. So as CVCs create this new group to do venture, especially in Silicon Valley, you know there's a lot of best practices, there's a lot of mentorships that are required to be on par with what the tier one VCs expect. I was grateful for the CVC ecosystem when I started because they taught me so many things. I looked at my peers in other firms, and they helped me kind of accelerate my learning to know strategically, tactically what I should do, what I could do, things like that. And so, this is my way of supporting the ecosystem. And as mentioned, most CVCs is less than ten years old. So that means that they lack experience. The history of Silicon Valley and that relationship-building aspect of VC funds. And again, what's nice is that the CVC community is very collaborative. They're looking for a strategic fit with startups in different lenses. So, two corporates could be in the same industry, but how they define strategic value or strategic partnerships vary, and so we're here to support each other. This community is excited because we talk about things that are very meaningful for CVC professionals. A perfect example- one of my more favorite ones is board member best practices. As a CVC, corporate citizen, and board member, we have dual fiduciary roles. So, what do we do? How do we behave? How do we excuse ourselves from certain things that may cause a conflict of interest? Those are very touchy topics that you really can't learn from a book, right? So, we set up this forum. We bring in a couple of experienced professionals to talk through some of the challenges, work around things, and think about their approach to particular issues. Other fun topics would be things like structuring commercial agreements. How do we use a side letter, what's fair for the founders, what can we do so that it doesn't frustrate or upset the other investors, to other things like talent management for diversity and inclusion? The most recent topic that we had was really to make sure that D&I and proper representation exist in CVC. And so, again, where pick and choose some of these topics and spend some time together to talk about everything that may not be casually discussed in an open forum, right? So, we abide by the Chatham House Rules and try to create that open format to discuss freely.

[00:15:28]

Ken: What a great opportunity not only to participate but, in your case, to give back or perhaps even pay it forward. And I love the top in terms of DNI. In Silicon Valley, I know it's been a hot topic among corporate venture capital for some time in particular. Clearly, in Europe, where we're operating from, especially around board membership, you see many of the same. And so, it's a very timely topic. Let's go back to your earlier comment when done correctly, right? Given your decade of experience across corporate venturing, what best practices have you seen in driving the most impactful innovation in those limited partners or funding corporations you've dealt with?

[00:16:16]

Jay: I've had the pleasure of working with a lot of first-time corporate and government entities looking to foster innovation. We start at the high level, right? And first and foremost, you need C-level support. You need the C-level support to mandate- change the company to influence their culture to embrace innovation. It's not to say that every business unit, person, and employee has to be the innovator. But it is required to move the company forward. Without proper support, you'll see a lot of pushback and inaction. This is where a lot of the problems arise, right? I've been part of a team where we were trying to streamline this from the side, and there are many people who didn't care. Trying to change that mindset to build that trust took a long time. Second- it should be obvious why a company needs to embrace innovation. So, this could be a cultural thing, it could be a tactical thing, but there has to be a vision statement that can be translated into actionable tactics. Articulating the desired outcomes is always a plus. For example, a hardware company trying to become- or wanting to transform into becoming a more software-centric company, right? But some kind of vision so that everybody understands the new direction of where they're going and why they need to embrace innovation so that they could try. Just to attached to that, also to allow failure. And because innovation is messy, right? It's an iterative process. A rigid structure, a rigorous process where corporates operate versus the messy, noisy startup ecosystem, there's a huge difference in culture. For first-timers, I always encourage experimentation. Spend time to learn, and it's at that point it's tough to measure your outputs objectively. Still, suppose you build your reporting capabilities to share insights and knowledge with your organization's key influencers and decision-makers. In that case, that's kind of the beginning step to collaborate and build this next iteration of innovation together. And so again, you know this becomes this relationship-building exercise, but really, to work for the common goal of this vision of why you need to embrace innovation. And then lastly, leverage the community. The CVC community, as I mentioned, is unique and collaborative. Again, we're here to support each other, share experiences. And there are so many innovation frameworks and playbooks out there, so selecting one or the other is the easy part, mainly because there's a lot of commonalities in the approach, but there's no silver bullet. There isn't this master guide of how you execute for success, and the reason is that the corporations have a culture. People support them. The hardest part is at that relationship level. Again, just gaining trust, the support, working out the details, and finding the right motivation to innovate together.

[00:19:26]

Ken: So, it has to be relevant to the corporation and that buffering, if you will, of what is relevant depends very much on corporations and their innovation capabilities. As I mentioned earlier in the podcast, you know PNG back in the day called it outside in, right? It rolled from the top down in that whole organization. And, of course, hallmarks like GE and others have also heralded how they go about doing that as well. You mentioned the general, if you will, criteria for the kind of best practice you've seen. Let's put a point on that. Which corporate venture capitalist would you call out as really the most successful, those that, in some sense, you could benchmark yourself with?

[00:20:16]

Jay: CVC efforts ebb and flow for a variety of reasons, right? And it could be because of management change, management leadership change. It could be because of the economic downturn. There's a lot of reasons why. But I've always admired Intel Capital, for example. They were one of the pioneers in CVC, and so they've gone through multiple iterations, multiple evolutions of their organization. But they've always been on this front line of influencing the community. So, for example, back in 2016, they announced at the company level this massive DNI effort, and they set these targets for 2020.

In 2018 at the GCVI conference, they gave this talk, and they met their 2020 goals in 2018, so two years ahead of schedule. So, they said, well, we're going to continue this momentum. They hit their goals and said, 'OK, well, we're going to continue to become more ambitious.' They've always provided that thought leadership in what CVCs do and have done right. I've always respected them. They're actually in the middle of another iteration as we speak, so we'll see how this evolves. But always, a great case study.

Other groups like Microsoft and M12 who've made really interesting investments making great bets. Groups like M12 and GV are less strategic, and that's why they've kind of branded away from their core parent company, although- I mean M12 is alluding to Microsoft and GV- the G in GV is for Google. But it really points to making investments in relevant companies for the parent company, but not necessarily a strategic fund, right? They've kind of evolved their CVC efforts so that they could again operate more freely, and that's an exciting, unique model that we're seeing more and more.

And then lastly, Salesforce has done an incredible job, and they were one of the first to launch an impact fund. They're actually on fund two. I think it's a $150 million fund. Many of the corporates and corporate venture capitalists in the United States have started announcing their involvement in impact or purpose. So, Citi has an impact fund. Amazon and Microsoft both look at supporting purpose-driven founders, D&I Founders as well. Prudential, many others. They're all following suit, right? I think that looking to foster innovation and purpose, I think, is going to be this next wave of innovation that's coming.

[00:23:08]

Ken: Yeah, that's great. I'd also probably throw a Sapphire in there, and as you said with the others, you know SIPs right at the front of it. But it's always been heralded as one of these that is somewhat strategically aligned but free to operate. And, of course, they've done well in terms of their return as well. Let's drill down a little bit on this idea of what's next in corporate innovation. I mean, put your prognosticator hat on. What would you say for the next five to ten years? What would you expect to see?

[00:23:42]

Jay: I see two emerging trends in the corporate innovation space. The first is that- while, corporates will continue to source innovation externally. I sense that we're going to see a rise in the effort to innovate internally and encourage intrapreneurship. So, this may be in the form of a venture studio or collaborations with startups or other organizations. But corporates have spent this last decade learning, build up their reputation, and grading themselves in the ecosystem, getting the entrepreneurial mindset within their employees. How do we leverage that newly learned talent right? How do we then scale that and create change? I think that we're going to see this more and more with corporates outside the United States. As I mentioned a little bit ago, the second is focusing the corporate innovation on solving for purpose. What this may mean at the higher level is embracing digital transformation - creating a more inclusive work environment and scaling businesses that solve for purpose. Over the last five years, 5-10 years, corporates have been channeling their efforts to strengthen their ESG rating. While CSR has been the company's commitment to stronger corporate values and scaling businesses - we need to evolve that and directly solve environmental and societal causes. Investors and shareholders are becoming more and more vocal and aware of ESG and other impact measurement and management scores and their frameworks. This is going to become a must, right? And the younger generations, the millennials, and the Gen Zs are also paying attention to businesses that stand for good. This isn't just a trend. It's kind of the future of the industry. And so, corporates need to leverage the company's strength, marketing positioning. And we're going to see a rise in solving for scale in financial, social, and environmental causes. This could mean de-plasticizing your supply chain. This could be creating fair work environments. This could be leveraging a technology to provide access to a higher quality of life while still supporting and driving revenues, new or old. These are the two trends that we're going to see, especially with climate change coming at full force at us. Corporates need to change, right? And it's no longer a PR game. The millennials and Gen Zs are very aware. They are very proactive about making sure that what companies say and do can be accounted for. And so, the corporates then must behave and act properly.

[00:26:36]

Ken: Corporate venture capitalists have always traditionally had two labors, right? There's generally what you called strategic alignment -which innovation's obvious- clear part of and then the financial return. And a lot of them, you would hear them say, bring relevant innovation and don't lose my money. It was the remit that they have. I like the fact that you've tied in impact, perhaps as a third lever, or you could say it's you know something- one of the criteria, if you will, for strategic alignment. But this Idea that impact now will carry much more weight, I think, is quite interesting. You said venture studio a moment ago, and it reminds me of a podcast we did with Guido Jouret, who had just left as the Chief Digital Officer at ABB. I asked him, in hindsight, what he would have done differently and that's the number one answer he came up with. He says we should have launched the venture studio approaching concept earlier. And Momenta has been lucky enough to support ABB on a venture studio since then. It's still very nascent, but I fully agree with you. I think that it's the beginning of a powerful trend that we're going to see. Let's kind of turn this around a moment because there are investors in this space, and you have been as well. What do you look for in your successful- or more successful startups?

[00:28:00]

Jay: I specialize and focus a lot on new and emerging tech, so it's working with early-stage entrepreneurs. I look for three things if one has identified the problem correctly and building the right solution for it. And so, does it create value that people are willing to pay for? Often when I talk to corporate leaders looking into this innovation space, I ask them how they define innovation, and we get many different definitions. My favorite definition for business innovation is a solution to a problem that provides value that people are willing to pay for. So, it's not innovating just to innovate, but it has to create value that has some kind of monetary value attached to it. Without that criterion- in the early onset, it's OK, right? We're experimenting with the product-market fit, but really, they need to nail that right, and then we could scale. The second thing I look for is how it's positioned against the competition. What is your competitive advantage? And then the third part behind that is the team, right? Is this the right team to execute on this vision to define and create that new market opportunity? Do they have the right mindset and motivation? And as cliché as all that sounds, time and time again, it all falls into those three, right? It's creating that right type of experience for the customer. Are you becoming customer-centric? Solving a pain point that they're willing to pay for? And there's a lot of examples there. But really, just that seamless experience so that whatever I'm paying for creates tremendous value to my daily life or whatever it is that I'm doing.

[00:29:45]

Ken: It's incredible. It always comes back down to those three elements, time and time again. Yet, many companies tend to miss it on one or the other. It's usually what they say, the archetype of the hacker and the hustler. You got the technology catalyst, and you've got the person who knows how to promote the heck out of it, right? And hopefully, somewhere in the middle is a solution or, as you said, product-market fit.

[00:30:10]

Jay: It's easier said than done.

[00:30:12]

Ken: Oh yes. The question I'm sure many of our listeners are thinking about is what's next for you.

[00:30:24]

Jay: I'm trying to solve for that as we speak. I attribute where I am today because I work to pay things forward. Since its early days, I've served as a mentor and advisor to various start-up ecosystems, such as 500 startups and Alchemist Accelerator. That effort has expanded for me to kind of reach out globally. Over the last six years or so, I've been quite keen on supporting purpose-driven companies. My focus is to figure out how to combine my startup experience with the product. My corporate venture innovation experience and really support the tech for good movement. I've been allocating a lot of my time recently supporting these ecosystems, including the Sustainable Oceans Alliance, Venture for Climate Tech and the Extreme Tech Challenge, to name a few. What's really exciting about this space is that there's so many venture backable, purpose-driven companies emerging globally, and they're all solving unique challenges with technology, right? There is a business model. They're using hard tech and they're solving problems that just bring tremendous value to the quality of life or to remove carbon or pollution. I'm really hoping to bring my experience and expertise to accelerate this movement.

[00:31:43]

Ken: Very good. Earlier, you mentioned an exciting book, "The Corporate Innovation." I believe 5th wave you had said. In closing, I always like to ask the question, where do you find your inspiration? And I think that book was a good recommendation, but how do you continue to motivate yourself, keep your energy up, and what is your secret, I guess I should say.

[00:32:09]

Jay: As COVID hit and the workforce goes global, my inspiration comes from working with people. The founders, meeting with entrepreneurs, investors who see the world through a different lens, understanding their perspective and looking at their future narrative.

Everybody has their ideal of what they want to do to influence change, so I'd like to absorb what they're thinking about and combining ideas, and trying to come up with something new.

I'm also inspired by experiencing culture, and I've had the privilege of traveling worldwide, learning and understanding history, and figuring out how to build bridges to shape these perspectives and mindsets, right? So, for example, between the US and Japan. The fun part about this is really. We're all here to solve these problems. These intricate problems are fostering innovation in the startup ecosystem, encouraging entrepreneurship. And ways to translate these innovation strategies that worked in Silicon Valley into other geographies bound by the limitation of the country's culture, access to capital, etc.

Two fun books that helped me understand culture were "Kiss, Bow or Shake Hands," which is just this fascinating digest of how business and the country's culture are. It's how you conduct yourself thereby country.

I was to travel to, let's say, Malaysia. I could just flip over to Malaysia and read 4-5 pages just to summarize how business is done and how the relationship culture works. I was having this conversation; I was also pointed to a new book called "The Culture Map." The subtitle is called "Decoding on how people think, lead and get things done across cultures." As COVID hit and the workforce is becoming global, understanding the cultural differences, and working through that, I think, will be an essential requirement for success. So those have been things that keep me inspired lately, and I've been paying attention more and more to it.

[00:34:29]

Ken: Great recommendations, "Kiss, Bow or Shake Hands" and "The Culture Map." And on top of your other advice as well. Well, Jay, thank you for sharing these great insights with us today.

[00:34:43]

Jay: Thank you very much for having me. It's been fun.

[00:34:45]

Ken: This has been Jay Onda, Corporate Venture Capital Advisory Board Member for the National Venture Capital Association and if I can add, accelerator of purpose-driven innovation. Thank you for listening, and please join us next week for the next Momenta Digital Thread podcast. Thank you and have a great day.

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