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CORPORATE VENTURE CAPITAL AND INNOVATION IN TRADITIONAL COMPANIES

Interview with Mathieu Guerville, Innovation Director and Principal, Ul Ventures

ABOUT OUR GUEST

Mathieu Guerville Silicon Valley Innovation Center Interview Speaker

Mathieu Guerville

Mathieu Started UL Ventures Fund in 2017. He’s a Corporate Venture Capitalist who invests in Smart Cities, Autonomous Systems and Advanced Manufacturing. He’s a Strategy, M&A and Innovation expert with a background in market intelligence, consulting and international trade. Mathieu led the development of a new business unit from 0 to 300 employees in its first 3 years though a mix of acquisitions, open innovation and organic initiatives by leading strategy, deals, integration and CEO/board level reporting.Forward thinking, Mathieu is focused on creating value through open innovation and financial returns through investment in early stage (Seed thru B) startups in autonomous systems (driverless vehicles, drones, robots), smart cities, and advanced manufacturing. Outside of the office, Mathieu is a huge soccer fan and photography lover. He’s gets it all done with a “French-American perspective”.

INTERVIEW TRANSCRIPT

Rahim Rahemtulla:
Hello and welcome to Silicon Valley Innovation Center, where we commit to discussion on technology and innovation through our Executive Immersion programs and our online events. We’re coming live to you today through Facebook Live, through YouTube. So don’t forget that in the comment section there you can send us your thoughts, any questions for our guest today. My name is Rahim Rahemtulla. I’m the Brand Ambassador here at SVIC. Today I’m going to be talking to Mathieu Guerville. He is Principal and Innovation Director at UL Ventures and he joins us now. Mathieu, is the connection good there? Can you hear us?

Mathieu Guerville:
All good. Thanks, Rahim.


Rahim Rahemtulla:

Perfect. I wanted to ask you, Mathieu, about UL Ventures, which you headed up when it began in 2017. That is a relatively young part of the UL business, which has itself been going now for over a century, in fact. So I was hoping you could tell us a little bit about why UL decided to start a corporate venture capital fund. Why was it at that moment, in 2016, that it was the right time to do it?

Mathieu Guerville:
Sure. Well, I think it all follows kind of a long journey. UL has been somewhat stuck in its own way and focusing on a very narrow definition of safety and a very narrow mission for the longest time, over a hundred years. But over the last ten years or so, we really started realizing that the definition of safety is evolving. People aren’t so worried about their dishwasher or their toaster setting the house on fire or getting electrocuted by power tools, but they start worrying about other things, be it cybersecurity, maybe the quality of the plastics that are in your water bottles and such. So over the past ten years we’ve really had a very long journey towards innovation to redefine what safety means and also redefine how we assess safety.

So that has translated into roughly seventy acquisitions that – actually, it used to be part of my role – a lot of internal programs as well, and I think about a year or two ago, myself and a handful of others started realizing that we had reached such a level of maturity in terms of innovation that some of the more forward-looking or exotic tools for more innovation could be potentially leveraged at that point. Corporate venture capital is obviously one of them. You may not be ready to do it when you just start doing innovation, but we felt that it was the right time for UL. So the idea and why not only the right time in terms of maturity but why does it serve our purpose is we really think that a lot of technology that UL has traditionally been involved in testing, certifying and inspecting was moving at such a pace that we can’t quite keep up and, frankly, if we went the traditional route of having our engineers keep up with what’s happening or sometimes acquiring companies, we would be a few years behind. And so, who is not a few years behind but instead a few years forward? That tends to be startups. And so we want to be like them. We had been actually involved with startups before, we’d done some collaboration stuff, etcetera, but this was just a natural extension of doing it, cranking the dial up a little bit.

Rahim Rahemtulla:
Sure. What do you look for in a startup to invest in?

Mathieu Guerville:
Yeah, so I think there is mostly three things. Number one is, obviously, there needs to be a connection to safety in some way, shape or form, either in the present form of the startup or in its not-too-distant future because obviously we’re still a mission-driven company. The second thing, I think, that we look for is actually some sort of correlation or ability to have an impact on UL’s business within three to five years. And what I mean about an impact, it could be something that helps us do our job better, it could be simply technologies that we would leverage down the line, it could be an impact in a way of opening up your market down the line, maybe collaborating with the startup, being a good market channel or something, but essentially deliver the ability to bring new services to our customer, still in the spirit of the loosely defined concept of safety. And then we are obviously looking for the same thing that most investors, financial or strategic, are looking for. We’re looking for quality in the people, quality in the projects and obviously things that are going to be relevant to us strategically. So if you have the new Instagram or a dog-walking app, we wish you all the best but it’s not necessarily something that’s going to resonate with our audience, both internally or even our customers, so we have to have some focus.

Rahim Rahemtulla:
That makes sense, of course. And let’s just say that there are many advantages that investing in startups can bring to UL, but how do you approach the risks? And when I say risks, I mean, of course there are the financial risks as there would be with any venture capital investment, but I’m thinking more about the strategic risks in terms of potential clashes of culture between the UL corporation, between startups. How do you get the balance right between neither side having undue influence on the other?

Mathieu Guerville:
Yeah, it’s a great question and it’s one that we get all the time. Even internally, people are asking, “How are you going to make sure?” Startups are also concerned, obviously, about protecting their IP and also not being too distracted by the big machine that a large corporation can be. So I will say that nobody that I know has really solved it. I was recently at a conference on that very topic in Santiago, Chile and no one, really, had a perfect answer. But there’s a couple things that we do in terms of mitigating the risk.

Number one is, in terms of the segregation of duty between what we do and what we expose inside of UL and the information that the startups may communicate to us. We’re also pretty liberal about letting startups limit our information rights. We essentially put some governance and some safeguards that way, sort of the formal way. And then the informal way, it’s really about us, the Venture’s Team, which is five strong and we’re actually hiring right now as well. We really play that role of handholding at both sides. Handholding can be facilitating but sometimes it’s also making sure that the proper governance, again, and the proper risk mitigation is in place. So that involves things such as prepping our internal UL teams before we introduce them to one of the startups or giving the proper guidance in terms of the types of commercial agreements that they could develop, what are the things that would be fair, what are the things that would be unfair. And so essentially we play that role of facilitating the relationship, not only for it to create opportunities but also so that it doesn’t bring unnecessary risks.

Rahim Rahemtulla:
And I’m wondering, though, what you think. You say there are these risks and, as you say, you have structures in place to try to minimize those. And I think what we see is that corporate venture capital is actually a growing phenomenon. There are more and more companies launching funds to interact with startups in this way, in spite of the risks. And so I’m just wondering if perhaps stepping back a little bit from UL, do you think that corporate venture capital is the right answer for any business seeking more innovation?

Mathieu Guerville:
I think it’s just a tool. And so, if you only do venture corporate capital and nothing else with regards to innovation, if you don’t have a proper culture, it’s most likely going to fail or maybe you will be successful from a passive investment perspective and you will get attractive financial returns if you do it well, but you’re not going to get what you’re actually getting out of it, you’re not going to get the innovation aspect of it. That being said, if you have the ability to do it, startups have limited amounts of time. They typically, in this day and age, don’t have too much trouble raising money, especially the good ones, so their most valuable resource is really their talent, which is often pretty rare, especially if you look at things like machine learning or AI. And just the sheer amount of time that they have in the day for their executives. And so you can get most of the benefits of corporate venture capital with just doing partnerships, commercial agreements and other sort of engagement with startups. But in reality, corporate venture capital allows you to have skin in the game, it allows you to show a real commitment to getting something done.

I think many people who have been at big companies know that partnership discussions typically are things that start on one day and then eighteen months later with nothing actually accomplished and it’s just a bunch of lawyers sending documents and redlining, etcetera. When you do corporate venture capital, first of all, that can’t happen. There are other investors, financial investors that have a much higher pace, and so you have to keep up with them, you have to meet the same expectations. You have other people that are drafting terms in some cases, if you’re not meeting the investment, and so you have to abide by those terms. And that actually, in some ways, that constraint creates more speed than if you had free-roaming and total control over a white sheet of paper to create terms of collaboration.

So I think it’s sort of a mechanism that puts more skin in the game, multiplies your return, actually, because then if you do a partnership and things go well, well, maybe you help yourself a little bit, you help the startup, but you don’t really have the financial upside if the startup really goes really, really high and starts flying really high. So it’s a good mechanism, it’s not for everybody, you have to be mature enough in your overall innovation process and it does bring about some risk that we just talked about. But overall I think it’s a good tool. And though many companies have started recently, I could foresee many more joining the trend.

Rahim Rahemtulla:
And I wanted to ask about other possible routes to innovation. Like you say, corporal venture capital does carry risks, it may not be for everyone. And so if you do find yourself in one of those organizations, companies where corporate venture capital isn’t an option, I wanted to ask what you think about other routes to achieving innovation. I noticed, for example, on your Twitter feed, that you had shared an article recently about how companies could invest or should invest in updating the skills of their employees. And that could prove useful in terms of innovation because that can turn employees into futurists – to use the terminology of the article – and it can keep them looking forward and ready to embrace change. And so that made me think, well, what if that could be applied then instead of something like corporate venture capital, because not every business can start a venture fund, but every business can build its own culture. So is that something, maybe, for a smaller business to look at, if corporate venture capital is not an option?

Mathieu Guerville:
Yeah, absolutely. I think that innovation needs two things to actually happen. One is a soft set of parameters and that’s the culture, that’s really feeling that ideation, innovation, that failure is okay, it’s almost sort of intangible, how to quantify things, but you need to foster the right environment, that’s also attracting the right type of talent, retaining it and fostering their creative aspect. So that’s one side of it and absolutely, it needs to happen and that article about continuous learning is part of that.

And then the other thing, you need some processes, because if you have a bunch of very creative people with a lot of great ideas roaming around the office but there are no processes, no pathways for them to actually start executing on the ideas, then nothing will happen. And so you need to have those two things and they need to be somewhat on the same level.

You can have things such as, very simple, an idea box where people know that if I have an idea, I know where to send it, because you may have an idea that is not relevant to you. We have engineers that may be working on vertical appliances, but just because of a side interest or maybe what they studied in school, they’ve an idea that could help us in material science. Their chain of command, the org chart, does not have really a good pathway for that, but as a company, as an idea box that is publicly available, well-promoted and where people feel like things will happen – that could be one thing, very simple. Then you have other of things that many companies are doing, such as hackathons. We’ve done a lot of executive leadership training at UL that includes very heavy components of entrepreneurship, teaching things like Lean Startup and all about having startup competitions for a select few people every year that go through a very intensive training. So it’s a set of, again, culture, the very soft aspect and then processes that actually start making the execution possible.

Rahim Rahemtulla:
It sounds like what you’re saying there is what maybe we could call “intrapreneurship”, entrepreneurship within a company. And that seems like a powerful concept.

Mathieu Guerville:
That’s right. Although some of it, you could do things that use of the concept of “open innovation” and not everything has to come from inside. You could do a hackathon that takes ideas from outside, whether it’s academia or startups, etcetera. But likewise, if you do that in isolation and you don’t have the internal culture to adopt the results, what you’re going to do is you’re going to have a really cool event, a very large bill for pizza delivery and then you will have basically nothing to show for it because all of the outcome, nobody will have any time to do anything with it, nobody will have even the mindset to do anything about it. I think people look for little gimmicks and silver bullets. One of the very famous one is, obviously, Google with the 20% rule: employees can spend 20% of their time or should spend 20% of their time on side projects. That’s great but in isolation it does nothing. You could not take a random company out there and just tell people to stop doing that if you don’t have the appropriate culture and pathway to the turn those little side projects into something a little bit bigger and the mechanism to curate that, know which one we’re investing more time in, which one should just receive that pat on the back and say, “Great. We learnt something, but this is not really going to go anywhere, so let’s focus on something else.”

Rahim Rahemtulla:
And the way you describe it, it does sounds it is quite a complex process to make innovation work. And, in that connection, I have read that innovation has been described as a field with a high failure rate and I wondered if you would agree with that because it sounds like, from what you’re describing, there are many areas, pitfalls, places where it can go wrong.

Mathieu Guerville:
Yeah, absolutely. I think innovation, as I mentioned earlier, you get the ideation process and people will fail 100 times in their head before they say something publicly. You’ll come up with 100 ideas and then realize they don’t really work. And so you’ve got that level, that most people don’t even realize is failure and that’s okay, it’s good failure. But where most innovation really fails is actually on the execution. It’s that one idea that you have the courage to speak for and to say, “We should try X, Y or Z.” The reality is most of them will fail and that’s okay, but they have to fail – and I hate to use tired clichés – they have to fail fast and you have to learn from it. And I think one of the reasons why innovation is very hard is people are so afraid of failure, for good reason. In many companies, in many cultures, failure will get you somewhat blacklisted for promotion, it will essentially have a negative impact. And so, then what you have is people that are maybe innovative but can be still be somewhat risk-averse. So maybe they’ve a family to feed and they don’t want to sacrifice seeing their career by exposing themselves to unnecessary risk that’s not actually in their job description. And so all of those things are very hard to manage and it’s not something that can happen overnight, it’s not something that’s going to be just purely by setting a new employee handbook and a bunch of processes. It really does come down to, does the culture allow it? And then do the processes enable it?

Rahim Rahemtulla:
And does that come down – helping people to get over this fear of failure and this risk of aversion – does that come from, say, the top of the company setting an example? From the management downwards? Or how can you help people to get over that?

Mathieu Guerville:
Yeah. I do think innovation can come from top or bottom, but the enablement and the structure and the tolerance for failure absolutely has to come from the top. The top is just, by design, where the performance reviews happen, where most of the decisions happen, etcetera and so if failure at that level is perceived as something that turns an employee into a black sheep, then everything, the foundations are eroding very quickly. So obviously, you’re absolutely right, it needs to come from the top, from that perspective.

Rahim Rahemtulla:
And another essay I know you’ve talked about in the past has come from one of the partners at Y Combinator who said that – and perhaps it’s sort of what we’re doing today – is talking about innovation and looking at different ways of doing it, different philosophies, different pieces of advice about how it should be achieved. And, in this Y Combinator essay, the author was actually talking about how this more applies to startups, where there may be someone, an entrepreneur, that wants to start a company but is a little bit afraid to do that and then shopping around for advice, just asking everyone what they think, what’s the right way to do things before they actually take any steps. And I thought maybe in the innovation field, the same thing can happen, where everyone’s sort of looking around, trying to find out what’s the best way to do something without actually doing it. So what’s your take on that? Should companies just jump in, like you say, fail fast, just iterate through it? Or would they be best to definitely take it slowly and make sure they get it right?

Mathieu Guerville:
Yeah. I’m a big fan of this idea playing in a sandbox. And when you’re a startup and you have two employees or not even employees but just a couple of founders together, your whole company is a sandbox and so you can throw everything at the innovation wall and see where it sticks and as soon as something doesn’t stick, then you pick it back up, you reshape it a little bit and throw it at a different wall. In a big company, it’s much harder to do that for the reasons that we discussed earlier. Maybe if too many people see you fail, nobody will get an impact and also, frankly, the size of the wall and all of the implications of a failed product could be magnified to a very large extent and really be detrimental. But innovation doesn’t always have to happen for everything; you could just try a new product for only a select few customers, in a select few markets. You can even create a product and only test it internally. Or you could create a product, spin it off or you could partner with as a startup that has a product and kind of see how things work. You don’t have to go all in in the deep end.

And so I think it tends to be sort of an excuse. Innovation is one of those things that people will always be a little bit scared of, even people who are innovators still can be scared of consequences, whether it’s to lose face or, again, it could have a bad impact on your career. People are always looking for an excuse as to why it can’t be done. And I do think that if you just narrow the scope, you mitigate the damage not by changing the idea. If you have a good idea, if you have a really disruptive idea, don’t make it merely incremental just to mitigate the risk; keep it disruptive, keep It really interesting and exotic but do it in a very small environment, really contained, where if something goes wrong, the virus doesn’t spread and where you don’t turn the whole planet into a zombie apocalypse movie.

Some examples, I mean, something I know recently, I talked with a few guys, with people from Nigeria and their excuse for why innovation is difficult – and I use excuse loosely – was there’s a lot of corruption, etcetera. And so I challenged, I think he was the dean of the university or maybe a professor of the entrepreneurship program, and I challenged him and said, “But are you corrupt? Is your department with the university corrupt?” “No.” “Okay, well, why don’t you try something in there? Whether it’s digital currency or whether it’s a small app or something? Why don’t you try it first in your department, in that safe sandbox, and then if it works it might be worth trying to overcome the bigger hurdles.” And that’s sort of how it works. Another one was with a banking institution. Their excuse was, obviously, “regulations, and the risk, and we have so many customers and so much money, if this doesn’t work…” I said, “Well, you can try it on ten customers. What’s the risk that could happen with ten customers? If you pick ten, you could cover all the loses if needed.” And try it like that. Not everything has to be straight to the deep end.

Rahim Rahemtulla:
Thank you, Mathieu. I think that’s sound advice. We’re just coming to the end of our time now, unfortunately, today. So if I could ask you just to perhaps – we’ve been talking about how there’s so much advice out there and you’ve obviously given us plenty of really useful insight – but if I had to put you on the spot and just say, “Boil it down to me to one key thought or idea that you would like the listeners and viewers, the executives out there, to take away with them when it comes to making innovation happen,” what would that be?

Mathieu Guerville:
I know it’s something we haven’t talked about today, but I’m a big believer that curiosity is where all the ideas happen. And so you need to create either hired really curious people who will always be tinkering on the side or reading about things that are not related to your job or, if you really have a staff you want to work with, start to foster that curiosity, expose people to different things because the first step of innovation is ideation. And, in reality, I do believe that innate curiosity and that exploratory mindset do come up with ideas in the first place. Then the execution, you can recruit people or consultants even, you put all the right frameworks in place to give you the tools to manage and curate and all of that, there’s plenty of that. But the mindset, people coming up with ideas that are actually worth betting on, that can be quite tough. So foster curiosity or hire it.

Rahim Rahemtulla:
Perfect. Thank you, Mathieu. Curiosity, the keynote for our talk today. Many thanks for joining us here at Silicon Valley Innovation Center.

Mathieu Guerville:
Thank you.

Rahim Rahemtulla:
And thank you to our listeners and viewers. Don’t forget, the recording of our talk today with Mathieu is going to be up on our website very shortly. That’s siliconvalley.center, you can find it there. You can also find recordings of our past webinars and interviews and you’ll see a schedule of all the ones that are upcoming. I would like to remind you, we have one upcoming, which is going to be next week, August 7th, 9 a.m. PDT. That’s going to be with Gregory LeBlanc. He is a lecturer at the Haas School of Business. It’s going to be extremely interesting, just like Mathieu has been for us today, but that’s where we’ll have to wrap it up. So, many thanks for joining us and we’ll see you again soon. Bye-bye.

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