From the Ground Up: Verizon Ventures’ Approach to Seed Investing

By Dave Famolari

Over the past few years, we have seen corporate investment arms reemerge as a powerful part of the venture capital ecosystem. Corporate venture capital groups (CVCs) provide great value to early stage companies seeking the guidance and resources needed to scale and uphold their vision.

Looking beyond the traditional CVC Model

Conventional wisdom says entrepreneurs turn to corporate venture capital when they have mature companies seeking deep industry connections and commercial deals with the CVC parent, and that CVCs invest in startups to reinforce the company’s core offerings. This mutually beneficial arrangement is certainly true for many of Verizon Ventures’ investments, and facilitating smart collaboration between our portfolio and Verizon’s business units is one of the most rewarding parts of my job. However, forward-looking CVCs are beginning to look beyond ‘reinforcing’ investments – those that strengthen the corporation’s existing or planned near-term offerings – to include ‘expansionary’ investments – those that fundamentally extend the capability set of the corporation into new areas. These expansionary investments help Verizon Ventures and other CVCs get out in front of trends – providing future value and optionality to diverse product groups within the company.

To be at the forefront of trends, you need to move upstream in the innovation process. That means increasing the firm’s exposure, strengthening relationships and ramping activity by both investing and partnering with early stage startups. The closer you can get to the source of new ideas, new business models and new technology, the better equipped and informed you can be to meet the challenges of a rapidly evolving environment.

Increased focus on supporting seed stage companies

Historically, the perception is that CVCs don’t invest in seed rounds, but that is changing. Not all corporate venture arms are willing to take a bet on seed rounds, but for Verizon Ventures we continue to evaluate seed stage opportunities and expect to increase the volume of deals we do at this stage. We also support very young companies through effective partnerships – working with startup accelerators, incubators, co-creation studios and organizations running living labs.

Accelerators and incubators have become a staple of the tech community, providing important resources and community to entrepreneurs and startups that are looking to propel their ideas. From the Internet of Things to Artificial Intelligence, there are constant waves of investment opportunities in trending sectors. At Verizon, our strategy isn’t to simply back several companies, sit on a few boards and expect automatic returns. Instead, we look to bolster the growth of the companies we fund by providing a broad range of support and services as well as opportunities for mentorship and networking. We have found that getting involved earlier in the lifecycle of companies is an excellent way to do this, and we participate actively in the accelerators and incubators we choose to partner with.

Businesses evolve over time and there is no such thing as a one size fits all framework for business development, especially for very early stage companies. Below is just a snapshot of how Verizon Ventures is working with accelerators, incubators and other startup-focused organizations to help fuel innovation.

Our partnerships

The Hive

The Hive is a Palo Alto-based co-creation studio that incubates and accelerates startups working solely on applications and use cases for data science technology. As part of our partnership with The Hive, we provide market insights to seed stage startups developing innovative machine learning and big data solutions.

The Grind

Expected to open in early 2016 in Lower Manhattan, The Grind will provide flexible workspace options for startup companies and entrepreneurs. Verizon will be helping these early stage startups by providing leading edge technology with Verizon’s advanced FiOS to portfolio companies. Verizon Ventures will look to make our team available for office hours, networking and mentoring sessions.

TechStars

Our ongoing partnership with Techstars, Ford and Magna International on the Techstars Mobility, driven by Detroit program is an excellent example of how corporate VCs can provide accelerators with valuable industry expertise. Last year, we brought in members of the Verizon Telematics team to provide the engineering brainpower, technology platforms and mentoring to Techstars’ newest community of emerging companies to help them catalyze innovation in the Internet of Moving Things (IoMT) space.

Grand Central Tech

Most recently, we partnered with Grand Central Tech (GCT) a NYC-based accelerator that provides startups with the resources needed to build and scale their business through a yearlong program that offers a year of free space with no equity taken. As a Board member, I am looking to provide mentorship, establish business connections and provide critical infrastructural resources that contribute to these startups’ future success.

While seed investing has historically been outside the realm of CVCs, providing strategic funding, mentorship and networking connections to early stage startups has benefits to CVCs and startups alike. By partnering with accelerators, incubators and coworking spaces across the country, Verizon Ventures has been able to tap into the frontiers of startup innovation at its early stages and help propel our expansionary investment strategy, while offering critical resources to the startup ecosystem at the same time.

 

David Famolari is a Director at Verizon Ventures. Prior to Verizon, David was Vice President at Rutberg & Company, a mobile-focused investment bank, where he headed the private company practice.  He co-founded GoodCompany Ventures, a venture incubator that uses the tools and resources of the venture capital community to help entrepreneurs implement innovative ideas for social impact.  David spent more than 12 years in advanced R&D creating new technologies, leading joint ventures and overseeing innovation programs at Telcordia, Bellcore and Bell Labs.  More at  http://www.verizonventures.com/team