Protocol Pipeline
The inside story of the venture capital and startup world by Biz Carson.
Photoillustration: Erik Mclean/Unsplash/Protocol

Why corporate VCs want to ditch the label

A money gun labeled “corporate”

Hello and welcome to Pipeline. This week: Why you shouldn't taint startup swag with blood, the Instagram account you have to follow for the founder goss, and what's changing for corporate venture capital in this crazy market.

Overheard

  • "I can't believe I let that one get away." It's something overheard frequently by investors who will decry their anti-portfolio, but Felicis Ventures' Wesley Chan argues that the best investors don't treat startup founders like wild game to be hunted.
  • A floppy disk scavenger hunt. Dialup's Danielle Baskin first went viral in VC circles for her "fwd: fwd: lucky pitch deck" email that reached over 500 investors. Now she's gone and hidden a bunch of floppy disks around San Francisco. But fear not if you can't find (or use) a floppy disk: You can still go on her co-founder quest.
  • Did you catch the Adam Neumann stories? The VC meme Instagram account you need to be following — if you get approved — is @prayingforexits, who highlighted some truly wild Adam Neumann stories this week. It's a bunch of alleged anecdotes so take it with a grain of salt, but if you've missed Valleywag, this is the closest fix. [Editor's note: I'm right here, you know.]
  • Please don't taint your startup swag with blood. Science Inc.'s Liquid Death water, championed by Peter Pham, released a limited run of 100 skateboards that are painted with Tony Hawk's blood. The legendary skateboarder even sold his soul to the startup via a supposedly legally binding contract on his vitality. Perhaps that's taking things too far?

Biz on Biz

Shedding the corporate (VC) label

When I talked with Alex Kayyal this week, it was clear his ambitions as the new leader of Salesforce Ventures wasn't about making it one of the top corporate venture capital firms out there.

Kayval doesn't want to mess with what's made his operation a success. But he does want to redefine it. As the new managing partner overseeing its investments, Kayyal hopes Salesforce Ventures will be known as one of the best enterprise software investors out there — no "corporate" qualifier needed.

  • "In many ways, we've kind of stopped thinking of ourselves as [corporate venture capital], and I think that's a big change for us. As I looked at a lot of the companies that we're investing in today, it's remarkable how our remit has grown and our aperture for what kinds of companies we're excited about backing has really expanded tremendously," said Kayyal, who took over as Salesforce's lead after longtime lead Matt Garratt left in June to join Palo Alto-based venture firm CRV.

Corporate venture capital hasn't been immune from the crazy market. Deals involving CVCs already reached $79 billion globally in the first half of 2021, according to CB Insights. That's more than the entire total of 2020.

  • The top five corporate VCs in terms of deal activity in the first half were Alphabet's GV, Salesforce Ventures, Coinbase Ventures, Intel Capital and Microsoft's M12.
  • When it comes to snagging unicorn horns, Salesforce Ventures, GV, Citi Ventures, CapitalG and Siemens' Next47 were the top five for the first half of the year, CB Insights said.
  • "Our capital deployment has increased a lot; our number of companies has increased a lot," Salesforce Ventures' Kayyal said. "That's a reflection of the opportunity, but certainly it's also a reflection of our aspiration and what we want to do."

Corporate venture capital firms are evolving to compete against their pure financial brethren. And it's not just the capital that's backing them that's different.

  • Coinbase has done over 150 deals into crypto startups in the last three years, but it's writing checks straight off the balance sheet using Google Docs and a dedicated Slack channel with zero full-time staff, Coinbase COO Emilie Choi told Forbes. "I've got to imagine we're the only ones doing it this way. It's almost like our little hidden secret," Choi said.
  • BMW i Ventures considers itself a hybrid VC: corporate-backed, but with its own fund that allows them to lead deals, make decisions quickly and take board seats. Instead of having to do investment committee decisions or waiting to get all the approvals needed, it switched to a typical LP-GP fund model five years ago and recently closed its second $300 million fund that's entirely backed by BMW but with the partners making decisions out of Mountain View.
  • "If we invest in a company, we have the same goals as the founders, meaning we want this business to be as successful as it can," said managing partner Kasper Sage. "If you are using corporate venture capital as an instrument or pipeline to acquire companies, that is not the same goal because you want to buy it cheap. You're basically investing, and then you're just waiting until it takes off and then you're snatching it up. … That is not something we do."

Corporate VCs may actually have a leg up in this funding environment, thanks to having different value-add than the traditional VC side.

  • Because of the crazy amount of money coming in, good founders in competitive deals have more choices than ever when it comes to investing. Both Kayyal and BMW i Ventures' Marcus Behrendt pointed out that often there's a good number of funds in a deal these days, so corporate shops often get called in by traditional VCs as a good strategic addition.

And as the rest of the venture industry may feel like a tiger (global) is chasing them, the corporate VC side isn't feeling the downward pressure quite as much.

"We don't feel squeezed out. We don't feel we're not getting access to good deals," Behrendt said. "Bringing our logo and our corporate background into the game often helps you to get in deals that are really interesting."

A MESSAGE FROM SINGAPORE EDB

Expanding to Asia can be difficult, but Singapore is here to help. The Singapore Economic Development Board's guide to setting up in Singapore has all the information you need to find the right partners, talent, and connections to succeed in Asia.

Learn More

Inside Track

  • After Paul Graham trashed venture debt a few weeks ago, Y Combinator's Jon Levy published a venture debt 101 guide to help people understand the risks and rewards of the financing device.
  • People don't talk enough about balancing children and family with work. Ex-Facebook exec and Coatue chairman Dan Rose wrote a Twitter thread on the trade-offs he had to make on the career and family side during his time in tech.
  • Negotiating cash versus equity is hard, so ex-Greylock VC-turned-Apple employee Josh Elman shared his advice on how people should evaluate the financial component of startup offers.
  • If you want to track a tiger, Chirag Modi created a database that's updated every time Tiger Global makes an investment (which is like, almost every day).

Need to Know

  • A startup founder was arrested for overstating ARR. The DOJ said Headspin's former CEO Manish Lachwani misled investors when he overstated ARR by over $50 million and charged him with wire fraud and securities fraud.
  • This week in corporate concessions: OnlyFans flip-flopped on its porn ban. Apple settled and will let developers email their customers about other payment options, allowing them to circumvent Apple's 30% take — a move that could muddy the waters for Epic's lawsuit against them.
  • The tea leaves in Yale's pick. After David Swensen died in May, Matthew Mendelsohn is taking over Yale's endowment. Venture capital investment now makes up a whopping 25% of Yale's portfolio, so it's no wonder they tapped Mendelsohn, the guy who was in charge of it, to be the endowment's lead.
  • Asana and Twilio became the first companies to dual-list on the LTSE. The CEOs were also backers of the long-term oriented exchange.
  • A16z launched a $400 million seed fund. Of the investments it has made since the start of 2020, about half have been in seed-stage companies, the firm told me.
  • Release radar: Opendoor co-founder JD Ross has a new startup called Royal, which is allowing people to buy ownership in songs and share in the royalties — think of it like equity crowdfunding, but for music. Oh, and it has its own hype video, of course.
  • On Protocol: What does productivity actually look like in meetings? The Protocol Braintrust weighs in.
  • Also on Protocol: "You remind me of my mom," or how older workers get sidelined in tech.
  • Your weekend reading: If at first you don't succeed, try, try, try, try, try, try, try and keep trying. That must be the Google motto when it comes to messaging, right? Ars Technica has an incredibly detailed history of the last 16 years of its attempts to conquer messaging, but as my colleague David Pierce pointed out, the table of contents alone is a truly epic burn.

Five Questions With...

Hyper's Shahed Khan

Shahed Khan, the co-founder of Loom, announced this week that he'd be joining Hyper, a new early stage firm. Hyper is a new sister company to Product Hunt, which is where Loom launched, and it will invest in a handful of startups four times a year as part of its membership/mentorship program.

Pitch deck vs investment memo: What's your preference and why?

Investment memo. They've begun to gain a lot more popularity and I love being able to quickly assess a business off a one-pager rather than a 20+ pitch deck.

What book do you think every startup founder should read?

"The Hard Thing About Hard Things," by Ben Horowitz.

What problem do you want to see a startup solve?

A startup that can detect where wildfires are most likely to occur based on multiple factors (dryness, heat, etc.) and share the data in real time or make equipment to prevent them from occurring.

What product or service are you totally, even irrationally, loyal to?

AirPods. I can't go back to wired headphones again.

What's one of the worst predictions you've ever made?

That bitcoin was going to become a fad.

A MESSAGE FROM SINGAPORE EDB

Expanding to Asia can be difficult, but Singapore is here to help. The Singapore Economic Development Board's guide to setting up in Singapore has all the information you need to find the right partners, talent, and connections to succeed in Asia.

Learn More

Thanks for reading this week's Protocol Pipeline. If you like what you're reading, sign up here to get it in your inbox. Send story tips and newsletter feedback to biz@protocol.com.

Correction: A previous version of this newsletter incorrectly stated that Next47 was Samsung's venture arm. It is a venture firm backed by Siemens.

Recent Issues