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July 16, 2020

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CVC: SURFINGTHE WAVE OF

INNOVATIONSTHOMAS KAISER

Dear readers,

There is economic literature which should be listed as Must-Reads ofentrepreneurs. At the top of my personal ‚Best of’ list is "The Lean Startup" by EricRies and Clayton M. Christensen's "The Innovator's Dilemma". While Ries focuses onprinciples of successful entrepreneurship, Christensen deals with the problem ofwhy successful companies fail due to their own success.

Thomas Kaiser, a partner at Ringier Digital Ventures and Marcau Partners, takesChristensen's principles as his starting point and shares his view about theimportance of innovation in corporate structure and how disruption can ensurelong-term corporate success.

A good-read for your summer vacation! Yours,

Nele DagefördeCOO/CMO Adello

E D I T O R ' SN O T E

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IN SEARCH OF DIGITAL

OPPORTUNITIES

I NTERVI EW WI TH THOMAS KA I SER

My family and friends wouldprobably describe me as a “mediajunkie”. In retrospect, I wasalready a media junkie as ateenager. It is no coincidence thatI ended up in the media industryafter my studies. It was just luckthat this was the industry thatwas on the verge of the greatesttransformation in its history dueto digitalization. I was luckybecause I was able to live out mycuriosity to discover new thingsfrom day one.

Thomas, tell us more aboutyou. How would your familycall you?

There is much talk today aboutthe so-called “WHY” in the careerchoice of young people. This isthe sense and purpose that acompany should fulfil in order tospark the passion. Looking at mychoice 3 decades ago, today’sdevelopments in the political andsocial environment, but also thedevelopment of the majorInternet platforms, have broughtthis “WHY” even more to the fore.Democracies cannot functionwithout media diversity.

What are you passionateabout?

In 1996 I was able to start myfirst internet project atBertelsmann Media Group as ajunior. Even back then, themission was: Find out whatdisruption our businesses aresuffering as a result ofdigitalization and whatopportunities are opening up!What we then did would becalled “venture building” today,meaning the financing of inside-out innovation projects. Thencame the phase of strategicinvestments through theformation of joint ventures andthe acquisition of more maturedigital companies. Only later dida startup culture develop inGerman-speaking countries,which made it possible to investin exciting young companies. Myprofessional career followedpretty much this pattern.

Why move on to CorporateVenture Capital, was thata logical next step in yourcareer?

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CORPORATE VENTURECAPITAL (CVC) IN ANUTSHELL

In essence, it’s all about outside-in or open innovation: exploringnew fields of activity, getting toknow disruptive business models,but also learning about newforms of cooperation togetherwith your own business units.There are innumerable variantsas to which mandate a CVC unitshould fulfil. In my view, however,it should always be a strategicallybased mandate. This should notbe confused with the term“strategic investor” who wants tocontrol a certain business. CVC isalways about minorityshareholdings in the earlydevelopment phase of a start-upwell embedded in the overallcorporate strategy.

Could you explain the roleof a CVC?

The simplest way to explain this iswith the image of the “innovationtoolbox”. CVC is one tool in thistoolbox but by no means the onlyone. Each tool serves a specificpurpose, but there is no SwissArmy knife for innovations in yourown company. CVC fulfills itspurpose when it comes tocooperating with start-ups at anearly stage and in a crediblemanner and to actively participatein their value creation, bringingmore than just cash to the table.

Aren’t there other ways toachieve the same?

In my professional career, I nevermet a company that has managedto stay at the top only throughorganic growth and internalresearch and development. Noteven Google has been able to dothat. The major value driversthere were also the acquisition ofbusinesses such as YouTube,Android, or Doubleclick. Parallelto these strategic moves, evenGoogle consistently invested instartups, not least, to gainexperience with business modelsthat are less dependent on theadvertising business than its corebusiness.

In which sense do youbelieve CVC can be ablueprint to tap intoinnovation and strategictopics?

CVC has long since establisheditself in individual industries,above all the pharmaceuticalindustry, where filling one’s ownproduct pipeline is unthinkablewithout external innovation.Conversely, no other industryunderstands how to supportstartups with in-house resourcesin such an exemplary manner:

Do you see CVC’s in a goodposition in the VC industry,as there seems to be a lotof competition out there?

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research and productionfacilities, distribution, networkaccess, etc. This way of thinkingis increasingly penetrating otherindustries as well. Globally,according to CBInsights, thedocumented CVC deal volumereached an impressive USD 57billion in 2019, a tripling since2014.

This also has to do with the factthat CVC units are now much moreprofessionally positioned, and theshare of “tourist VC” has fallensharply. These are the CVC unitsthat blow for a retreat in theslightest headwind.

We focus on start-ups in the areasof direct-to-consumer commerceand marketplaces. We feel athome there. The start-up foundersfeel that they will find experiencedcontacts in a very broad andinternational network of digitalentrepreneurs. Another advantageis that we don’t have to ride thenext wave of trends just to pleaseinvestors, but can makeconsistent, long-term investmentsin what at first glance appear tobe traditional markets that have alot of potential for digitization:Property Tech, Food Tech,Mobility, eHealth, etc.

RINGIER DIGITALVENTURES

Ringier Digital Ventures (RDV)builds on the strengths of Ringier:a wide reach in the consumermarket and a high level ofcompetence in the developmentand operation of onlinemarketplaces. This gives RDV aclear positioning in an alreadyvery well populated VC market.The CVC unit, which operatesindependently of the mother ship,also ensures that decisions canbe made on an equal footing withrenowned co-investors and at thespeed required for the VCbusiness.

Where do you see theUSP’s of Ringier’s CVC-unit?

What are the things youlook for in startups(especially now, in crisis)?Why would that bedifferent from other VC’s?

In the VC business, of course, thefirst thing we always look at arethe successful “exits”. Out of 21investments we have made in thelast 5 years, 5 have already beensold again, and among the

What are the highlights ofRingier CVC which makeyou proud so far?

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remaining 16 there are numerouspearls. We were particularlypleased with the sales of MOVU tothe Baloise Group and ofFOODSPRING to Mars Inc.However, just as important asthese commercial successes is thefact that, with a small team, wehave succeeded in building areputation as a serious VC inGerman-speaking Europe andincreasingly in the Nordic and CEEregions. The best proof of this arethe many well-known co-investorsin our startup investments.

Preferably both. There is no casein our portfolio where this isconsidered “either - or”, butalways “both - and”. The startupfounders have a good sense ofwhen a CVC unit can add valueand what values it stands for. Itis, of course, a great help to ushere that Ringier itself isregarded as an example ofsuccess in the field of digitaltransformation. In this way, thecore business and CVC unit payoff each other. This is a factorthat should not beunderestimated in the “war fortalent”, i.e., in the search forcommitted employees who willhelp the company move forward.

Why should startupsconsider partnering with aCVC rather than a big VCname?

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SURFING THE WAVE OF

INNOVATIONS

Instead of a vision, I would like tomention a truism which - althougheveryone is aware of it - is still thecause of entrepreneurial failure: theinnovator’s dilemma, i.e., not toattack his or her own successfulbusiness because it is successful.The more successful a businessmodel is today, the greater thechance that it will attractchallengers. Disruption, in allconsistency, always comes from theoutside (even if the CEOs of thecompanies would like it the otherway around). It is not enough to seeand understand this disruption, youhave to get to know it up close. CVCunits are a perfect tool for this.

What’s the vision you followthat you'd like to share?

Approximately every 10 years, thereis a tectonic shift in the innovationlandscape, often driven bytechnological leaps. The marketentry of the iPhone marks such aturning point. Few companies areprivileged to be at the beginning ofsuch a development, most simplyadapt well and profit from the newpossibilities (e.g., by developinggreat apps). Currently, there aresigns of an innovative leap forwardagain. And I don’t mean theintroduction of AI into all areas oflife or the democratization ofblockchain technology.

How do you think Swissentrepreneurs can benefit inthe current crisis?

The fact that software solutionscan be found in almost all mobileand immobile goods increases thedemands on the relatedengineering services. It’s all aboutthe advent of the Internet ineveryday objects, be it coffeemachines, automobiles orintelligent lawn irrigation systems.This is a unique opportunity formany SMEs or “hidden champions”who are now supplying theseareas with traditional goods.

The Swiss economy and theuniversity system are excellentlypositioned in these areas inparticular and can benefitdisproportionately from this nextstage of digitization.

There are successful models todayfor how a CVC unit can besuccessfully established. So thewheel no longer needs to bereinvented. As always, however,implementation requires a goodmix of experienced specialistswho are familiar with the startupand investor market and amanagement team with a long-term perspective (often theowners behind it) who provide theCVC project with staying powerand the necessary funds.

What would yourecommend to othercorporates who considerestablishing a CVC?

Thomas Kaiser was CEO of Ringier’s Online Marketplaces and eCommerce business and amember of the Executive Board of Ringier AG from 2012 to 2017. He has more than 20years of experience in digital transformation projects (e.g., Bertelsmann, Burda DigitalVentures, PubliGroupe). Today, he is a partner in an investment management company(Marcau Partners) that develops digital ventures projects for corporate investors. Thisincludes the development and expansion of the startup portfolio of Ringier Digital VenturesAG.

More about how to establish a CVC-Unit you find in this CVC-series.

Thomas KaiserPartner at Ringier Digital Ventures, Co-Founder Marcau Partners

A B O U T T H EI N T E R V I E W E E

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https://marcau.vc/https://medium.com/marcau-partners/cvc-serie-kapitel-2-aufbau-einer-erfolgversprechenden-cvc-einheit-dafc9346e31c

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