We recently spoke with Claudia Fan Munce of IBM’s Venture Capital Group. IBM doesn’t invest equity in startups; rather, this small group within IBM works with 120 of the world’s leading VCs to give their startups access to IBM technology and, more importantly, IBM’s customers in 170 countries. Since forming in 2001, the IBM Venture Capital Group has nurtured close to 1400 of these relationships. So, it is (1) oriented around later-stage ventures, and (2) focused more on B2B and enterprise ventures than consumer ones.
Listen to the Interview
Download the MP3.
Our Questions and MP3 Guide
Question: You don’t invest cash for an equity stake like a traditional VC. How does your group work, and what value do you bring to entrepreneurs?
Skip to 1:35 of MP3 (note: technical glitch; blank for about 30 seconds).
Summary: New ventures have a tough time getting large enterprises to take them seriously. The buyer sees too much risk. IBM can take away that risk by partnering with the ventures or acquiring them. That takes a lot of due diligence by IBM, primarily to identify whether real synergies exist between IBM and the ventures. Claudia leads the group that identifies which ventures to partner with and does the initial evaluation before bringing them into the IBM eco-system.
Question: Can you give an example of IBM facilitating a new venture to solve a significant enterprise problem?
Skip to 4:45 of MP3
Summary: The scale of what IBM is doing here is interesting. This group has 43 innovation centers around the world and has done deals with 1000 partner ventures, 31 of which have since been acquired by IBM.
Question: You have been active in Asia, even in relatively unusual markets such as Vietnam. Can you give some background on this focus and what you are seeing in those markets?
Skip to 7:45 of MP3
Summary: IBM is going after countries with high GDP growth because that leads to revenue growth for IBM. These new emerging markets are off the radar of most VCs, but you do see some there, such as DFJ and IDG, which are typically the first to new markets. Most of the ventures target local opportunities, because high GDP growth throws off a lot of relatively obvious opportunities (as the economy grows, people need products and services that we take for granted in developed countries).
Question: How do you see social media use in large enterprises rolling out? At what stage are we in this market, and how is it viewed at the CXO level in large enterprises?
Skip to 12:28 of MP3
Summary: IBM views social media as mission critical: as a way to grow revenue with large clients by adopting a more collaborative approach by which their 400,000 employees can engage. I asked about ROI, and Claudia said it is a bit like asking what the ROI is on buying lunch for your client: you think it’s effective, but you can’t prove it.
Takeaway
Sitting on my desk, by pure coincidence, was a well-worn copy of a great book by Lou Gerstner on IBM’s turnaround in the early 1990s. His view was simply that large clients need help from a firm that can align all the technology (no matter what it is) to solve big, hard business problems. IBM still looks like it is doing this well. Being agile is easy when you are small and young, but very hard when you are big and old. That is why the IBM story and the role its VC group is playing in it is interesting.
Listen to the Interview
Download the MP3.
