Guest Lecture about Corporate Venture Capital by Herman Kienhuis for Corporate Venturing course, MSc Business Administration, Amsterdam Business School (University of Amsterdam - UvA)

1. Corporate Venture Capital
Herman Kienhuis, May 3 2018, Amsterdam
MSc Programme in Business Administration
Corporate Venturing Business Lab

2. Agenda
• Introduction
• The venture capital industry
• Corporate venture capital
• CVC Case studies
• Q&A

3. Introduction

4. Personal Introduction
Managing Director• KPN Ventures
Founder/partner• River Venture Partners
Studied Chemical Engineering• and MBA
5 years Finance & Strategy• (McKinsey)
8 years in Digital Media• BusDev (Sanoma Digital)
6 years in• Venture Capital
Married• , father of three teenagers
Loves live music• , movies , vintage design and
slow food
Supporting sustainable development• , education ,
research journalism and diversity

5. About KPN Ventures
Key objectives Investment scope Portfolio
1. Strategic return
by creating
partnerships to
boost the
development of
innovative products
& services
2. Financial return
on exits
• Early growth-stage companies
(>€0.5m revenues), based in Europe
• Active in:
o Cyber Security
o Digital Healthcare
o Internet of Things
o Smart Home
o Cloud Computing
o Data & Analytics
o Mobile/OTT services
o Networking technology
• €0.5m - €2.5m initial investments, as lead
investor or co-investor
• Selective investments in complementary VC
funds
EXITED

6. The Venture Capital (VC) Industry

7. Origin of modern venture capital
Andreesen
-Horowitz
Balderton (UK)
Prime (NL)
1957/1958 1972/1973/1974 1982/19831964/1965
US Small Business
Administration Act
US National Venture
Capital Association
1999/2000
Internet
bubble
2006/2007
Rocket Internet
(GE)
Atomico (SE)
First venture-backed
startup: Fairchild
semiconductor
European Venture
Capital Association
Kleiner Perkins
Sequoia
Bessemer (VC)
1995/1996
Benchmark
Index (CH/UK)
Venrock
Draper
Johnson
Sutter Hill
Greylock
2009
Accel (US/UK)
ParTech (FR)

8. Types of venture capital and other financingcapitalneed(€mln)
100
50
10
5
1
0.5
0.1
high risk low risk
supplier credit
bank loans
stock exchange
(public equity)
private equity
start
development phase
friends & family
crowdfunding
strategic (corporate)
investors
Pre-seed
(preparation)
Seed
(mvp)
Early-stage
(start-up)
Later-stage
(consolidation)
Growth-stage
(scale-up)
Maturity
venture capital
angel
investors

9. How does venture capital work?
1. FUNDRAISING
2. SCOUTING, EVALUATION
& INVESTMENT
3. MONITORING
(PORTFOLIO MANAGEMENT)
4. EXIT
PORTFOLIO
COMPANIES
(ENTREPRENEURS)
5. DISTRIBUTION
GENERAL PARTNERS
(VENTURE CAPITAL
FUND MANAGERS)
LIMITED PARTNERS
(INVESTORS)
Evaluate
investment
opportunities and
invest tranches of
capital in fundable
start-up
enterprises
Generate
liquidity
through
M&A or IPO
Govern and steer portfolio of start-
ups towards profitable growth
Distribute
proceeds back to
limited and
general partners
Source capital from institutional
investors, high net worth individuals or
family offices, corporations, sovereign
funds and public development banks
Profit share
(carried interest)
Minimum return
(hurdle rate)

10. 2. Scouting, evaluation & investment process
1st
Meetin
g
Pitch
session
(s)
Intern
al
sessio
n
Screening Review Assessment Decision
making
Nego-
tiations
Due
Diligence
100
Scanned
(teaser,
summary)
40
Reviewed
(business
plan)
20
Examined
(team,
market,
customer
references,
financials)
4
Offered
(term sheet)
3
Diligenced
Contracts
2
Closed
6
Proposed
(investment
proposal)
Dealflow from network introductions,
startup/pitch events, databases/research,
matchmaking platforms, advisors, etc.

11. Fund size (invested capital) Exit proceeds
5. Exit: VC math
Investment Target return: 3 x cash return
(in 10 year ca. 20 IRR p.a.)
• Avg. shareholding at exit: 15%
• Total exits valuation: €1B
• 20 investments
• €2.5 per investment
SCOUTING FOR
FUND RETURNERS
Required exits and
success rate
Foals (+€10M): 100•
(500% )
Ponys• (+€100M): 10
(50% )
Unicorns (+€1B): 1•
(5% )
€50M
€150M

12. Development of VC financing in the US
Source: Wikipedia, NVCA

13. Development of VC financing in Europe
Source: Dealroom.co. Excludes buyouts, secondary transactions, debt, ICOs, lening and capital grants

14. Venture capital funding per country

15. Dutch Venture Capital funds
(source: Peak Capital)

16. Corporate Venture Capital (CVC)

17. Origin of corporate venture capital
90’s70’s60’s 80’s 00’s 10’s
1960 – 1977
First wave of Corporate
Venture Capital: large and
cash-rich conglomerates
aiming to diversify and find
new markets
Examples:
Dupont, 3M, Alcoa, Boeing,
Dow, Ford, GE, General
Dynamics, Mobil, Monsanto,
Ralston Purina, Singer, WR
Grace, GM, Exxon and Union
Carbide
1978 - 1994
Second wave:
Silicon Valley
1995 - 2001
Third wave:
Dotcom craze
2002 - now
Fourth wave:
The Unicorn Era
(“software is eating the
world”)
Examples:
• Tech: Xerox Technology
Ventures, Intel Capital,
Motorola, Eastman
Kodak, Analog Devices
• Pharma: J&J, Smithkline
• Other: Colgate,
Raytheon, Lubrizol
Examples:
• Tech: IBM, Microsoft,
Dell, Lucent, Samsung,
SAP, Qualcomm,
Softbank
• Media: Hearst, Bertels-
mann, News Corp.,
Reed Elsevier, WPP
• Pharma: Novartis
Examples:
Tech• : Google,Cisco,
Salesforce, Naspers, Alibaba
Pharma• : Merck, Lilly, Roche,
Pfizer
Other• : 7-Eleven, Campbell
Soups, General Mills
NL• : Shell, Randstad, Eneco,
KPN, ING, ABNAMRO

18. CVC and other corporate venturing
Development stage
Control
yes
limited
no
Early/growth-stage Later-stagePre-Seed/Seed
Ideation challenges
In-house Incubator
Startup Studio
Investor in financial VC
Fund
M&A
Direct Scale-up Investments
Corporate VC Fund
Partner in ext. Scale-up
program
Investor in financial VC
Fund
Hackatons
Corporate Accelerator
for external startups
Corporate VC Fund
Direct Startup Investments
Corporate VC Fund
Business Development
Joint Ventures
Strategic partnerships
Startup Challenges
Partner in ext. Accelerator
Investor in financial VC
Fund

19. Development stage
Control
yes
limited
no
Ideation challenges
In-house Incubator
Startup Studio
Investor in financial VC
Fund
M&A
Direct Scale-up Investments
Corporate VC Fund
Partner in ext. Scale-up
program
Investor in financial VC
Fund
Hackatons
Corporate Accelerator
for external startups
Corporate VC Fund
Direct Startup Investments
Corporate VC Fund
Early/growth-stage Later-stagePre-Seed/Seed
Business Development
Joint Ventures
Strategic partnerships
Startup Challenges
Partner in ext. Accelerator
Investor in financial VC
Fund
CVC and other corporate venturing
ventures
innovation fund
ventures

20. Development of Corporate Venture Capital
2017: 270 corporate venture capital units,
investing $31B in 1791 deals,
Participating in 1/5th of all VC transactions
Source: CBInsights CVC report 2017

21. Most active CVC’s globally
Source: CBInsights CVC report 2017

22. Active European CVC investors
Selected investments 2017-2018
Allegro.ai, Prophese, Modcam, Pyreos Aimotive, Graphcore, Heliatek, Robart
Digital Reasoning, Adikteev, Saagie, CityMeo, Rise Up, HalioDx
En Voiture Simone, AgroEnergy, Seaver, Smartviser, Diabeloop, Upmem
Humanoo, Billie, theGuarantors, CarSpring, Movinga, Jodel, Meero
Gousto, Blow, Helpling, Celtra, Discuss.io, Sun Basket
Bring!, Matrixx, Actlight, Adello, Insightness, NetGuardians, Bexio
HelloAsso, Selenium medical, Linxo, Max, Ilea, Fluo, Yomoni, Cozyenergy
BettyBlocks, WeLab, Twisto, Fintonic, R3, CoBase
Anagog, What3words, Blacklane, Truckpad, VIA, Turo
Careship, Magic Leap, Zizoo, Clark, Blendle, Wayup, Qwant
Source: Dealroom.co analysis (4/2018)

23. Corporate Venture Capital vs (Independent) VC
IVC
Key objective
Investment horizon
Governance
Value add
Fund management
incentives
• Financial return for limited
partner investors through exits
• 8-10 years (closed-end)
• General partners (jointly)
decide on fund investments,
independent from LP investors
• General partners’ experience
and individual network
• Profit share (carried interest)
• Management fees
CVC
• Strategic value creation for
corporate investor(s)
• From medium-term to very long
(open-ended)
• Investment committee with
corporate executives decide on
investments
• Fund management experience and
network plus the corporate’s
industry expertise, business
network, channels to customers
• Corporate salary & bonus structure

24. Objectives and motivations of CVCs
And...
Strengthen innovation•
capabilities
Gain insights in technology•
& market developments
Get early access to new•
technology
Reduce cost of•
experimentation
Decrease time to market•
Team• -up with
entrepreneurial talent12%
24%
26%
47%
76%
79%Strategically align with relevant and
emerging companies
Listed financial returns as a core objective
Increases the ability to be a thought
leader in the category
Establish a relationship with potential
acquisition targets
Increases sales or profits of the incumbent
companies
Leverage portfolio companies to improve
internal efficiencies
Source: CVC Landscape survey, Q4 2015, kbs+ Ventures

25. Corporate Venture Capital Strategies
“Strategic -
Innovation”
“Strategic -
Growth”
“Independent” “Blended
objec:ve”
“Mul:-
corporate”
Examples DSM, Shell, NS,
Pharmaco’s
Sanoma, RTL,
LibertyGlobal
Cisco, Sony
Google Ventures,
Deutsche Telekom,
SAP, Intel
KPN Ventures,
Telefonica,
Qualcomm, Amex
Mainport,
Aster, Iris,
GMPVC
Primary objective Strategic: R&D Strategic: M&A Financial Strategic +
Financial
Financial +
Strategic
Structure Of Balance / Fund Fund / Of Balance Fund Fund / Of Balance Fund with multiple
corporate LPs
Governance lead CIO/R&D CEO/
Strategy/
New business
CFO/Fund
investment
committee
Strategy/
Innovation/
New Business
CFO/Strategy/
Fund investment
committee
Stage focus Seed/Early Growth/Late Early/Growth Seed/Growth Seed/Early
Value add focus Expertise, Lab,
Validation
Customer base Network,
infrastructure
Expertise,
network, assets,
customer base
Network
Source: adapted from Corporate Innovators Huddle’s Corporate Venture Forum

26. CVC Case Studies

27. “Strategic - Innovation”: DSM Venturing
(2001-current)
Strategy Examples of
successful investments
What worked for DSM
Size• : N.A. (not a separate fund)
Stage• : seed, early stage
Ticket size• : €0.5-5M
Geo• : Europe, US, Israel
Scope• : Chemicals, Materials,
Biotech, Life Science, Health Care,
Nutrition
Objectives• : primary: create
strategic options and value for
DSM, secondary: financial return
Approach• : Support with
commercialization and
distribution via IP licensing
• Long standing initiative which
build up solid track record
• Access to R&D, new
technologies and patents
• Acquisition of strategic
companies (e.g. Lipid
Technologies)
• Financial return through exits
• Complementary fund-in-fund
investments

28. “Strategic - growth”: SanomaVentures
(2012-2015)
Strategy Examples of
successful investments
What worked for Sanoma
Size• : €15 mln
Stage• : seed
Ticket size• : €0.1-0.5M
Geo• : NL + Finland
Scope• : digital media, ecommerce,
education
Objectives• : insights, access to
talent, reduce cost of
experiments, growth via
acquisitions
Key value add• : Supporting
startups with access to (consumer)
media
• Insights in new developments
• Access to entrepreneurial talent:
e.g. Wappzapp, Scoupy, Fosbury
• Reduced cost of launches (e.g.
Beautybox business, Video app
business, Fashion deal business,
BTLE beacon business)
• Realized revenue growth through
acquisition of successful venture
(Scoupy)

29. “Independent”: Google Ventures
(2009-current)
Strategy Examples of
successful investments
What worked for Google
• Size: $2.5b
(nb: started in 2009 with $100m)
• Stage: early to growth-stage
• Ticket size: $ 5-25m
• Geo: US
• Scope: Internet, mobile/
communications, healthcare,
security
• Objectives: financial return
• Key value add: providing support
with Google expertise
(engineering, design, recruiting,
marketing) and infrastructure
• GV quickly became one of
the most active CVC
investors in the US creating
access to outside talent and
ideas
• Boosting use of Google’s
infrastructure (e.g. Cloud,
Advertising, Analytics)
• Financial return through exits

30. “Blended objective”: KPN Ventures
(2015-current)
Strategy Examples of
successful investments
What works for KPN
• Size: €70 mln
• Stage: growth-stage
• Ticket size: €0.5-2.5M
• Geo: (North-West) Europe
• Scope: IOT, smart home, cybersecurity,
healthcare, cloud, data, mobile/TV
• Objectives: insights, innovation
partnerships, financial return from exits
• Key value add: Supporting startups
with access to expertise, network,
customer channels and infrastructure
• Build up innovation ecosystem
together with KPN new business
• Insights in new developments:
400+ startups scouted per year,
100+ introduced to business
• Creating cooperations to launch
new services, e.g. data simcards,
nationwide LoRa network, threat
intelligence, remote heart
monitoring
• Create financial return through
exits, e.g. Jasper Wireless
• Complementary fund-in-fund
investments

31. “Multi-corporate”: Mainport Innovation
(2009-current)
Strategy Examples of
successful investments
What works for MIF’s
corporate investors?
VC fund invested by Schiphol, KLM, NS,•
Port of Amsterdam,TU Delft and NBI
Investors, the independent fund manager
Size• : €26 mln (Fund I & II combined)
Stage• : seed, early-stage
Ticket size• : €0.2-2.5M
Geo• : Netherlands, Europe
Scope• : Logistics, Transport and Aviation
Objectives• : financial return, insights in
developments, access to new technology
Key Value add• : supporting startups with
access to LP’s, industry expertise and
network
• Professionally managed by
independent manager
with investment expertise
• Insights in latest
innovations, through 100s
of business plans and
active involvement of
corporate execs in MIF
• Active cooperation/
launching partner of MIF
portfolio companies
• Exits demonstrate success
of innovations

32. Q&A

33. Related resources

34. Investment Analyst Internship
@ KPN Ventures
• Business, Finance, Technology/Innovation
Management majors
• Proven affinity with (digital) technology and
entrepreneurship
• English language; Dutch fluency not required
• 4-6 months placement
• 50/50 Amsterdam/Rotterdam
Contact us at kpnventures@kpn.com

35. Thanks