QUALCOMM VENTURES: AN INTERVIEW WITH NAGRAJ KASHYAP
By Declan Denehan, Managing Director, BNY Mellon
What do a traffic app, a motion-tracking sensory system, and a mobile security privacy company have in common? From consumers’ perspectives, the answer might be all three are mobile technologies; to the innovators at Qualcomm Inc., they are successful investments by their CVC arm, Qualcomm Ventures (QV). Under the leadership of Nagraj Kashyap, Senior Vice President of Ventures and Innovation, QV has developed a successful business and investment model that sets the group apart from many traditional CVC’s. I spoke to Kashyap about the challenges, strategies and successes of launching and managing the division.
Where does QV fall in the bigger Qualcomm picture?
Qualcomm is a leading R&D supplier for the wireless industry, but many of us believed that we were not as connected as we could be to the end user of the services. QV was founded in 2000 to address this concern. While Qualcomm continues to focus on the primary customers, handset makers, QV enables the company to tap into the end user, as well as trends in the mobile technology industry.
What is QV’s primary focus?
We’ve identified two: One, making sure that the innovation happening at the edges of the markets where Qualcomm doesn’t normally sell was tapped into–so we could better understand trends and how they could affect the core business; and two, to act as a sensor for Qualcomm to make sure we’re aware of new disruptions in the mobile industry, new technologies, and potential new offerings. By informing the Executive Team on the external venture ecosystem and more broadly in the startup ecosystem, QV ensures that Qualcomm doesn’t miss out on a big trend from either ecosystem.
Where in the organization does QV report to?
Many corporate VC units have difficulty investing as quickly or freely as traditional venture capital firms. One way that QV tackles this challenge is by reporting to the CTO. Where many similar groups would report to a CFO or an executive geared more towards financial investments, our strategic vision aligns closely with our CTO’s. As the CTO looks at internal efforts with a longer horizon, QV similarly focuses on efforts geared in the three- to seven-year range. By contingently viewing efforts from both an internal and external lens, the organization as a whole can more effectively focus on technological happenings and ventures on a bigger “Qualcomm scale” effort.
Can you speak to the performance metrics you use?
Since 2000, QV has refined its approach to remain dynamic. When first launched, we used many metrics to measure performance, but this approach proved to be challenging since some of the metrics were strategic, which are nearly impossible to fully measure. Eventually, QV looked at portfolio companies, measured how much business they were doing with Qualcomm, and analyzed the metrics on a quarterly basis. When we found it hard to get correlation and causation, we refined the methods. Where we were once only looking at companies that were investors or with whom they had previously done business, we now analyze beyond what Qualcomm is doing today so we could truly act as a sensor for new business and technologies. We’ve started to rely more heavily on financial metrics that are easier to measure, however, I should stress that the financial metrics do not necessarily drive investment decisions. They also support strategy and the nature of the ecosystem. By keeping strategy in mind, remaining dynamic and falling back on financial metrics, QV has created credibility in Qualcomm, Inc. and the VC market.
How do you handle sourcing deal flow?
My group’s tenure and active engagement in the entire venture ecosystem, the VC’s, startup community, advisors and the QPrize seed investment competition, together has been invaluable in developing our large network; it’s our biggest asset in finding opportunities. By operating with a systemic procedure of sending opportunities through a multi-step process within our group, we are able to quickly, and effectively present multiple opportunities to the final investment committee meeting at any time. By presenting well-researched opportunities that are succinct and to the point, QV receives a high approval rate at any given investment committee meeting, which is comprised of a number of Qualcomm, Inc.’s senior executives.
Tell me a little more about the QPrize?
QPrize™ is Qualcomm Ventures’ seed investment competition. It’s designed to provide entrepreneurs their first level of funding so they can launch their idea into a successful start-up business. We are looking for bright, energetic and resourceful entrepreneurs who have a passion for bringing new technologies and services to market. Our goal is to have QPrize act as a catalyst for our winners, providing the initial capital to launch their great ideas and support the company to its first institutional funding round.
The first year we launched the contest was in 2009 and all the winners that year were subsequently successful in securing Series A funding or being acquired. Across 2009, 2011 and 2012, the total raised by winners is almost $120 million and to date QPrize winners and finalists have realized over $450 million in exits.
What do the numbers look like, thus far?
Starting in 2000 with $500 million, QV initially created a niche in early stage and seed investments. Building on early successes, we’ve been able to expand into later stage opportunities, now holding a portfolio of over 110 investments worldwide. All investments are on balance sheet, and as Qualcomm has a healthy balance sheet and QV has a solid track record delivering financial and strategic performance results, we have an evergreen commitment of capital. In terms of individual investments, we focus on the number of investments rather than on size. This number is gated by the number of employees, their experience and location. We’ve expanded from two geographic locations to seven and have found that this increase in area has greatly increased the number of investments. Qualcomm Ventures has more than 30 team members, including 20 investment managers from various disciplines that have in-depth knowledge of everything inside and around the mobile ecosystem. A vast majority of the team members started their investment career with QV and have stayed with us – we attribute that to hiring smart folks with relevant industry experience and then giving them the latitude to operate independently to close deals while providing adequate mentoring from the senior members of the team. One thing unique to how QV operates is that we normally only invest in regions where we have an investment manager on the ground. We like having team members that know their markets, the start-up community and have direct connections with Ventures Capitalists in their regions.
So far in 2014, we’re already up to 12 new investments, non-inclusive of seed deals. Most seed deals come in with smaller dollar amounts and due to latitude and credibility, so we’re able to close these deals without prior approval. So with the seed deals, we’ve done 20 investments so far.
What have been some of your successful exits?
QV has enjoyed multiple successful exits in recent years, including three exits of a billion dollars or more: Waze, Invensense, and NetQin. Waze, a community-based travel and navigation app, is unique in that it allows other users to share travel times, traffic reports and road information. It was voted Best Overall Mobile App at the 2013 Mobile World Congress, and was acquired by Google shortly thereafter. Invensense is a provider of the MotionTracking sensor system on chip and sound solutions for many consumer media devices. The exit occurred in 2011, and Invensense continues to grow and remain profitable today. NetQin, a mobile security privacy company, also exited in 2011 as the result of an IPO.
QV has had about forty-five exits since its inception. We credit good metrics and rigorous assessments as the key for success in obtaining big hits on exits.
What does the future look like for QV?
As the VC industry continues to gain press coverage, the question of the venture environment as a whole and where it stands is on everyone’s mind. In my view, it’s necessary to disregard the short-term concerns. We do not focus on whether or not there’s a bubble and if or when that bubble will burst–or not, we actually don’t pay much attention to it. Long term, we keep investing…the idea is that we keep finding good companies.
We’ve been doing this for 14 years and we are going to continue to seek out good companies, invest at the best valuation that we can get, take risks and help our portfolio companies grow. We are in this for the long term.
Finally, any words of advice for the CVC community?
Get the executive buy in then give clear signals to VC’s in terms of what stages you’re investing in. Make sure the community understands you’re going to be pro rata investors and that you’re not going to change your mind if the business changes. Align yourself with the entrepreneur and the VC’s and strategic benefits will follow.
“If you add value to the market, you’ll have influence in the market”.
For more information on Qualcomm Ventures and Nagraj Kashyap, visit https://qualcommventures.com/