Claudia Fan Munce is one of the most successful corporate VCs operating today. Munce was a founding member of the IBM Venture Capital Group when it launched in 2000. As Managing Director of IBM Venture Capital Group and Vice President of IBM Corporate Strategy, Munce leads a team that works with over 300 venture capital firms across 30 countries to advance IBM’s strategic goals for developing innovations worldwide. In addition, Munce serves on the Board of Directors of the National Venture Capital Association (NVCA), representing the voice of corporate venture investing alongside leading VCs and CVCs. Reese Schroeder, Managing Director of Motorola Solutions Venture Capital and Chairman of the NVCA’s Corporate Venture Group Communications Committee, interviewed Munce about IBM Venture Capital Group’s approach and to get more details on the billion dollar Watson initiative.
IBM is such an iconic brand. How do you see your corporate venturing effort supporting that?
IBM Venture Capital Group seeks to foster innovation in areas strategic to IBM’s interests. The team is working with leading venture capitalists to develop partnerships with their portfolio companies and develop the innovation ecosystem that supports our array of solutions. The team works on driving early insights from our discussions with leading VCs and the worldwide entrepreneurial community into IBM’s strategy development. We aim at supporting the early ecosystem development for IBM growth initiatives like Watson, IBM Commerce and development of new market opportunities, as well as working to identify relevant startup companies for partnership and M&A. In the last few years, we have grown our mission to take on a leadership role in advising IBM’s clients from leading enterprises on their innovation and growth agendas.
How and when did the corporate venture program at IBM start?
IBM Venture Capital group has been around for more than a decade now. We are one of the oldest corporate venture groups and we have been in business since 2000. We started then and continue to be a strategic corporate venture group focus on growing IBM’s business and not on IRR.
Can you describe your investment model today and how it has changed over the years?
IBM’s VC Strategy is to invest people, resources, technology and clients, not dollars. Unlike most companies in the industry, IBM has not been directly investing in startups. Instead IBM provides mentoring, market visibility, access to clients and experts to help build stronger more profitable startup companies. IBM’s corporate venture model also includes a fund of funds investment in venture capital funds, and a new $100 million direct investment fund announced last year to enable partnerships and development of new solution on IBM’s Watson analytic platform.
How big is the activity on an annual basis – from a dollars or number of investments basis?
IBM recently announced that it will invest more than $1 billion into the Watson Group, focusing on development and research and bringing cloud-delivered cognitive applications and services to market. This will include $100 million available for venture investments to support IBM’s recently launched ecosystem of start-ups and businesses that are building a new class of cognitive apps powered by Watson, in the IBM Watson Developers Cloud.
Through GEP and the SmartCamp program, IBM has helped to launch more than 500 new businesses in key areas such as green energy, health care and transportation. Additionally, these startups have seen more than $115 million in VC/Angel funding as a direct result of their participation in IBM’s SmartCamp program.
How big is the portfolio today and how does it break down by area?
IBM VC Group professionals work with nearly 300 VC firms and have broadened beyond the Silicon Valley area to more than 30 countries with a focus on key initiatives such as cloud computing and analytics.
IBM Watson Group has invested in three companies within healthcare and retail. We create partnership opportunities across our 17 industries and innovative technologies like cloud/SaaS , mobile analytics, Internet of Things, etc. We have also done three acquisitions aimed at extending our Watson cognitive computing platform.
What are your current areas of focus?
We want to be on the forefront of innovation. So we continue to focus around sectors Big Data, analytics, cloud/SaaS, commerce, mobile, Internet of Things and hyper-growth industry verticals like healthcare, retail, fintech, etc. IBM serves as a solution partner to our enterprise clients. Our interest is very broad, basically anything that can help our clients transform their business matters to us.
Where do your deals come from?
Our relationships with the venture capital and entrepreneurial community worldwide.
How and when did you get involved in the corporate venturing program?
My background is in computer science engineering. My IBM career started in 1985 here in Silicon Valley, working at IBM’s Research Division. After holding a variety of different technical and business leadership positions, including being head of commercialization and licensing of IBM Research Lab, I became a founding member of the IBM Venture Capital Group in 2000 and became managing director in 2004.
Can you see yourself ever doing anything else?
I am passionate about technology and entrepreneurship. So I like to be in a role closely tied to the entrepreneurial and startup ecosystem. I really think there is nothing better than what I do. I am a kid in the candy store with all the innovations around me, both internal and external.
Can you give us some background on the team? Size, backgrounds and time with the group?
Our team includes a diverse set of experiences from business development, sales, product development and research. The Venture Capital Group has a matrix organization with several teams from other business groups like Ecosystem Development and ISV enabling teams from other worldwide geographies. The team is highly experienced and the partners have over 70 years of experience with IBM among themselves so we really know how to champion new initiatives inside the company. There are 11 of them that have the title IBM Venture Capital Group partner, but all of us leverage the resources from a broader partnership organization and business development teams across the company.
How do you measure the success of your program?
Based on our ability to drive IBM’s strategic advantage and long term financial growth. The scorecard from IBM senior leadership, the number of successful partners we drove in from the venture portfolios of our VC partners, the number of successful acquisitions of startups, the feedback from clients on our strategic value to help them organize their innovation strategy, and more. As you can see, qualitative and not financial, but of course at the end of the day it is all about financial, but in terms of IBM revenue uplift from new business solutions.
What are the key financial and strategic metrics that you use?
We are a strategic corporate venturing unit so we measure our success based on how well we can complement the company’s strategic imperatives. Some of it is tangible in the sense of partnerships with innovative startups. Strategic metrics involve our ability to communicate strategic insights from our discussions with venture capitalists back within the corporation and influencing long term IBM strategy.
What is the most exciting thing you are working on these days?
IBM’s venture group operates in many regions outside the U.S. such as Latin America, China and Africa. This work has been particularly exciting to me as I am Chinese and grew up in Brazil and love exploring new ecosystems to help build the IBM partnership pipeline. Apart of that I am extremely excited at the possibilities to influence IBM’s initiatives like the new IBM Commerce unit, the $3 billion Internet of Things investment, and continuing the Watson ecosystem development activities.
What are some of the key lessons learned? About startups? About VCs? About CVCs?
Startups need to do their homework before they approach an investor or a corporate VC. It is really imperative that they figure out areas of synergy early on. This is particularly relevant when they are working on developing partnerships with large enterprises. Honest feedback from investors is extremely valuable to the startup and it is possible that they might come back with a newer business model that is much more relevant.
You are one of the most successful corporate VCs. For any company just starting a CVC program, do you have any advice you can share?
Attracting talent and building the right team is at the very top of the success factor of corporate venturing team. You need to hire people with a multiplicity of skills. They need to be able to understand the technology, the business model, develop relationships with the key players and also have the necessary financial acumen to evaluate an investment. However, securing your executive champions internally and building a relevant network of financial VC relationship are also critical.
I know that you are very active in the National Venture Capital Association. What is your role and why did you choose to be so engaged?
I joined the Board of Directors as in 2012 as the only corporate venture board member. I chose to be engaged so that I could represent corporate venturing units and bring up the issues that affect corporations on a day to day basis. I chaired the NVCA’s Corporate Venture Group prior to that, an advisory group that offers information for corporate venture arms. My new position also allows me to help shape public policy decisions that affect corporations (such as the JOBS Act) and strengthen the venture ecosystem.
What can we expect from Claudia Fan Munce and IBM Ventures in the future?
You can expect me and IBM Venture Capital Group to continue playing a leadership role in driving innovation around the world, and hopefully continue to have loads of fun doing it.