S01E03 - Beyond Podcast - Martin Sondenheimer

Summary

Today's episode of Beyond Core explores the topic of corporate venture building, which is the process of creating new businesses within a company. This strategy involves experimenting with different instruments such as corporate venture capital and building new ventures from scratch. There have been three phases of development for corporate venture building over the last ten years, including experimentation, setting up lean startup teams, and becoming more investor-centric. However, despite the progress, this strategy is still in its infancy and there are challenges such as units becoming #4 Many corporate venture builders are refocusing solely on the company's core business and/or disappointing with the financial value created by their ventures. AI is being used to automate processes, but could also be used in new business building by leveraging corporate assets. Innovation can be hindered by balancing the corporate disadvantage with leveraging corporate advantages, having enough patience and building minority ventures with portfolio risk, or major company/start-up venture with financial investors willing to be 20%. **Introduction** 1. Majority-controlled, minority-controlled, and corporate-controlled ventures are different concepts and have different strategic intentions. 2. Majority-controlled ventures are typically built to complement the core business and eventually be integrated back into the company. 3. Minority-controlled ventures are built to monetize existing assets in new ways and are typically hands-off and incorporated quickly with a founding team. 4. The building process for majority and minority-controlled ventures is also different, with majority-controlled ventures being more hands-on and operationFor startups under corporate venture capital, there are new challenges that come with being a subsidiary of a larger company. These include managing a complex stakeholder landscape and finding ways to incentivize talent. There are different approaches to incentivizing, such as giving real shares or using virtual stock options, but each comes with its own complications. In the future, corporate venture building may become more strategically focused and may also see a shift towards building AI product studios. In this episode, I sit down with Corporate Venture expert Martin from Swisscom Ventures to talk about the role of Corporate Ventures in the innovation ecosystem. Martin shares insights from his experience and expertise in the field, discussing topics such as the challenges and benefits of corporate venturing, the role of startups and external expertise, and the importance of collaboration and learning. He also recommends a few books and podcasts that have inspired and informed his perspective on corporate venturing. Tune in to learn more about this fascinating area

Transcription

Hello and welcome to a new episode of Beyond Core, the podcast for business leaders who dare to think beyond today's success and build the future. In every episode, we explore entrepreneurial strategies for unlocking new growth beyond your core business from platforms, digital ecosystems, AI driven ventures, and circular business models. We dive deep with industry pioneers who are shaping what's next. If you are looking to scale innovation, create new markets and future proof your company, you are in the right place. And today we will explore the topic of corporate venture building. As you know, companies have multiple options to innovate. They can buy companies, they can partner with other peers in the ecosystem, or they can build their own new businesses. And corporate venture building is exactly about this building your own new S-curve of growth. So we will today explore this topic in detail. And I'm doing it not alone. I have also my favorite co-host with me. Hello, Nathalie. Hi, Mathias. Great to be here again. Yes. As always. And, um, we as a duo, we have also a special guest today. We have Martin Heimer. He's the former global head of corporate venture building at Munich Re, an insurance company. And he is also expert in corporate venturing and innovation. Hello, Martin. Hi, Michel. Hi, Nathalie. Nice to meet you. And thanks for having me in your podcast. Great pleasure. Great to have you, Martin. Thank you. Perfect. So let's go straight into the topic. So, Martin, maybe you can tell a bit more to our audience who you are about your journey and your experience in building corporate ventures. Yeah. Happy to. Um, yes. Um, I have always been fascinated by how new technologies, emerging technologies, um, change and can transform industries and businesses. That's why I spend my about last 20 years in, in building, investing in and transforming businesses. Um, first as a management consultant for many years, then as a corporate venture investor. And uh, recently in recent years as a venture builder. And you mentioned in my last role as global head of corporate venture building and managing director of 1884, which is Munich Re Digital Ventures holding company. I had the great opportunity to build a, first of all, a corporate venture building unit from scratch, and then together with the teams in the US and Germany that I had built up. We have been creating and launching more than 12 tech businesses in the fields of tech, fintech, climate tech, Agtech, cyber and IoT, and most of them we have founded as 100% subsidiaries as well as some, as I would call them, real founder owned or real startups, where 1884 would hold the minority share. And after we incorporate those startups, we then guide those companies through classical board seats, approaches and governance setups that we have also created for our for our ventures there. And happy to dive a little bit more in detail onto this topic later as we go. And maybe what's interesting to to to mention in addition, is in in my first years in this role, I probably spent, I always say half of my time, and I underestimated that amount. I have to admit, building this corporate venture building framework and system. Um, meaning the first of all, the definition of the of the corporate innovation and corporate venture building strategy, hiring the team, establishing the right processes and approaches from ideation to incorporation, and then especially building up this independent operating venture studio, including capabilities such as HR incorporation, go to market, product finance, etc.. And about the other half I spent on, you know, actually building this. Um, going forward. Uh, I will advise, uh, and support corporate uh, as well as their startups along, uh, the entire life cycle of corporate innovation and corporate venturing, from innovation strategy to, um, the development and setup of, you know, innovation vehicles as well as, uh, you know, supporting, um, companies in their execution of their, uh, innovation endeavors to also supporting companies in the exit of venturing activities, which happen to be, uh, quite a relevant topic. Uh, in recently, I live in Munich. Uh, uh, and, uh, I enjoy, uh, living here with my three kids who keep me also very, uh, busy, uh, day in and day out, as you can imagine. Again, thanks for for being here. Yeah. So kids are always like ventures, right? So you need to grow them up and scale them and help them to, to grow in life. Uh, so you have, uh, a fantastic business retail, but also, uh, very good experience with your kids. Um, so let's go straight into the corporate venture building topic itself, as it seems like you are very, very knowledgeable about it, but also your experience a lot. And corporate venture building is not a new topic. It's been out there for for a while. So ten years, 15 years or so. Um, where corporates. Follow this path. So what do you think is the current status quo of corporate venture building? So what happened in the last ten years and where are we right now with this topic? Yeah. Um, well, let me first, uh, if you allow quickly, um, sort out a little bit the Instrument of code venture building compared to the other instruments. Um, because I think they're always a bit, uh, mistaken sometimes. Um, so let's take corporate venture capital. So investing in startups and venture clients as one group of instruments, for example. Uh, for me, this instrument is, uh, has the aim to, um, get access to new technologies to learn from these new technologies and then to ultimately use these technologies, uh, within the company, the mothership. Um, it can also be, uh, it can also be a step into or foot in the door for MLR, of course. Um, venture building, on the other hand, um, I see as an instrument to build new businesses, And that will become relevant hopefully for the company in the future. Either with the purpose of generating revenue or with the aim to increase, or to create company values and enterprise value. Um, if you look at the different phases and you asked, you said it's around for quite a while. And recently in a group we discussed, okay, what are the different, uh, development stages we have seen so far in corporate venture building and where is it heading next? So let's start a little bit with the with a few back. So um, I would I would distinguish between roughly three phases. Um, the first phase, uh, we can call the experimentation phase. So in this phase, corporates, um, experimented with the instruments of venture building. Typically they didn't have, you know, a big strategy behind nor did they have own teams and uh, uh, mostly fully outsourced the building of a single venture, which was typically the start to, uh, venture building consultancies. In a second phase, then companies have set up own teams, have established lean startup thinking, have established a customer centric perspective when building new businesses. But there was one challenge with it. Ventures were typically not thought from the end, meaning from the investor perspective. So when it started, it was yet unclear for most ventures if they will become a full subsidiary of the corporate or should enter in the in the VC world. Now, in the third phase, we've seen units mastering this challenge. So the units became highly professionalized. They set up, you know, own companies, independent companies, uh, with a well-oiled incorporation machine. Um, and took this, as I mentioned before, this investor centric approach, uh, what they thought about, okay, cap tables, etc. and how they need and how a venture needs to be investable for professional investors. Um, but that created one other challenge, um, because with units becoming more and more investor centric, um, my observation is they not only operationally moved away from the mothership, but also strategically moved away from the mothership, uh, which creates new challenges. Um, I think despite this, uh, different, uh, or this already, uh, time around and these different evolution stages, uh, for me, corporate venture building is still a young function in the corporate world and probably in its kinda shoes. And I'm sure we'll see more, uh, you know, more stages and waivers coming and we'll see further maturing of this instrument going forward. Actually, I totally agree with you. I think even though we've been hearing about venture building for a long time, this like you said, there's some stages of evolution, a bit like digital transformation, which we heard about how many years ago. I don't want to sound too old, but, uh, and that we're still in some phases of this, uh, uh, especially with artificial intelligence and everything. Um. So it's kind of in its infancy yet there's been some maturity stages. And I think actually, uh, um, you've been I mean, there are not that many, uh, corporates that go through have been through those phases. Yet still, despite the fact that the model has been existing. So you've been, uh, a pioneer, um, with the state of flux we are in all, uh, you know, the economy, uh, at the moment, um, we see some hesitations from corporates. Should we go beyond core and maybe via corporate venture building? Um, should we refocus on the core? Um, what do you think that, you know, what's your opinion? And what do you see happening? Uh, in in corporates. Yeah, well, um, there's different signals in the market. I'm. I'm seeing, um, and they're somewhat contradicting. Um, on the one side, um, there are voices and studies saying, uh, new business building will become the top priority of, you know, CEOs this year, which is great news. I think, um, given all the turmoil and, you know, um, you know, Europe and needing to invest into, uh, its own future even more. On the other hand side, we have seen a lot of companies discontinuing their corporate venturing activities, uh, I think not only in Europe but also in the US. But there is a there is a, you know, a growing symmetry of units, uh, of corporate venturing units. Um, if you ask if you would ask me for the reasons why they were, why they discontinue or close, um, I think there are different reasons. We have seen you mentioned one. Uh, refocusing solely on the core business is definitely one topic we see a lot. Um, distressed situation of the mothership is another one. And then probably also to some degree disappointment about the strategic and or financial value that was created from those units. And this for me, this applies. And what I've seen applies similarly to venture building units as well as for corporate venture capital units. Uh, within the corporates. My personal belief is, and my conviction is that, um, companies will need to reinvest in growth and innovation and in order to, you know, to remain relevant in the future and to become or remain future proof, uh, given all the developments we see at the moment. And, uh, I'm personally very much convinced that, um, new business building by using techniques like venture building, uh, will continue to be a very relevant instrument of innovation going forward for companies, especially for those companies that, um, have a long term perspective and have access to the necessary capital, um, and have, um, interesting corporate assets, uh, which is important in venture building to leverage them as an unfair advantage to build new businesses. Uh, maybe also a bit closer to the core than, uh, we have seen building businesses, uh, so far in the last couple of years. And how have you how do you, um, see the latest trend of AI, uh, maybe fueling corporate venture building? Because, as you said in your last sentence, it's very important that corporates leverage their assets. And, uh, one major asset is the data corporates. Have they collected massive data in the last years of, uh, ten, 20 or 30 years, whatever. They also, uh, with the digital transformation digitalized, all a lot of a lot of those data points. And, uh, now they can leverage the data, uh, to fuel their own AI, uh, models or whatever, and bring up new products or services based on AI. So could this AI be also, uh, kind of a spark for corporate venture building? Um, I would say yes and no and probably a little bit too early to tell, but, um, let me let me get, uh, let me say a few words on my perspective on this. First of all, at the moment I'm seeing companies leveraging, uh, generative AI, large language models, mostly for the purpose of. An automation process improvement, productivity. So it's more an instrument to affect the bottom line, if you will. Um, then an instrument, uh, to build new businesses. Um, that's probably I would say the next wave will see, after companies have become a bit more experienced in using AI as a technology. Um, I come from an industry where data always played a big role. And, uh, um, I think if we look a little bit beyond the hype, first of all, um, we see that, uh, having, uh, your data properly in place, uh, is still a big topic and a prerequisite for all kinds of AI activities. So this remains, I think, an ongoing challenge. Uh, but let's not go down this road too much. Um, now, if you think about the the combination of AI and new business building and venture building as a technique I can very much imagine that you know, the way you work. The way you build new businesses through using this venture. Building techniques will also be interesting for building new products, new use cases, um, that are infused by AI. So we already see some venture building units, I would say becoming also a somewhat AI product studio. Uh, so we see this is definitely one outlook I have for venture building units that they become. Yeah, kind of this AI product studio going forward. Um, which is a good thing, probably because we can leverage, you know, methods and processes. Again, like Lean Startup that I mentioned earlier and a lot of learnings from how to build new businesses. You can leverage this in AI and build use cases, products, maybe even businesses a bit more close to the core by using AI. So that would be my $0.02 on this. And also, uh, maybe com uh, um, enrich a product or technology focus with a business focus. So, um, often, you know, we think of AI as, uh, as a, an end goal. We need to do AI, right? What do we do with AI? But what's important is not so much the technology which will happen somehow. It's. What business model do you put above that? What use case do you, um, uh, use it for, etc.? Um, I have a question on what you said earlier. Um, on you said maybe some corporates are somehow disappointed with the outcomes of corporate venture building of corporate, uh, or VC of, you know, and I would say, I mean, a bit more broadly also with entrepreneurship and open innovation. What it made me think of and I'd like your your view on it is that I think. All corporates have to innovate. It's a question of, uh, surviving, I think. But, um, because a lot of people are becoming or are professional in innovation, we tend to forget that innovation is taking a risk. And so we are disappointed because there are some failures. Um, but at the end of the day, when you again, when you innovate, you are taking a risk and, and you need to accept some failure even if no one of us want failure. Um, by professionalizing, uh, through the venture building process, for example. Then you reduce the risk, but you never delete the risk. What's your take on maybe the appetite of companies to take that risk or. Yeah. Um, well, I think first of all, the reasons are manifold. Why, um, why things don't work, right. Um, and I always say that, uh, as a corporate innovator, uh, you have another front where you need to fight, right? You don't fight in the market with your competitors for clients, but also you have your kind of internal fights that you need to fight with your HR, communications, finance and departments. Right. So there is another front which makes life as a corporate innovator and corporate venture builder and investor, maybe even a bit more complicated than just being completely greenfield. So, uh, one thing for me is you need to find a balance between avoiding how I always say the corporate disadvantage of having this other front and on the other hand side, um, leveraging the corporate advantage. So leveraging interesting assets the company has we mentioned about data but also customer access brand, etc.. So there are things you can leverage as an innovator that the company has which which can be an unfair advantage if you have if you balance the corporate let's say disadvantage advantage. Right. So that's one. Um, another one is um. Um, maybe let's call it patience or long term perspective. Um, I mean, we know that, um, let's take the example of, of venture capital funds, right? They typically last ten years. And after ten years, you look, uh, have you, uh, you know, developed and invested into a successful portfolio of corporate startups and, or, sorry, of startups. Um, as a corporate, I have often seen that you, you, you know, your your, your duration of patience is, uh, the board tenure, right? Uh, and if you have a board change within this tenure, uh, you may not have, uh, the amount, the right amount of time to be able to really demonstrate success. Um, so that's definitely one thing. Patience. Right. Within corporates to, you know, to go the whole journey, uh, of corporate innovation, corporate venturing. Um, and then maybe another aspect is, which is a bit detailed but interesting. Um, if you if you build. And we're talking about corporate venture building. So if you build new businesses as a corporate, um, you can either build, um, minority ventures where you hold a minority share and you can build an interesting portfolio. Maybe, um, if you build, you know, majority companies where you control most of it, you, you can hardly build a portfolio of 30 companies. Right. As the VC does have this portfolio risk effect. Right. So there is, by design, a higher risk, I would say, uh, of uh, uh, in this sense, because typically you don't have these big portfolio sizes as the big venture capital investors can afford, because they only invest a little bit in a lot of companies and are not a lot, uh, in a few companies. So that might be a systematic, um, higher risk, um, aspects within corporates, uh, if you will. Yeah, I think this is also introducing the next question a bit. Um, so as you said, they can maybe build ventures they fully control or where they have the 100% shares of on this venture, or they can, uh, have minority shares. Maybe you can also give a bit more intro to this topic. So what are the the pros and cons of each of those, uh, ways? Yeah. Um, for me, I see three fundamental, um, different types of models of corporate ventures. Um, and that's a result of a learning journey, uh, within myself, within the company. Um, and I really don't see a lot of other models in these three. And, um, I make it a bit black and white on purpose. Um, the first model for me is, um, I would call the majority owned venture. So this is a setup where the corporate parent, uh, controls the majority of corporate startups and typically holds 100% of these shares. And then the second model is the other extreme. Where the corporate only holds a minority share, typically between 15 to maximum 20% to keep it VC ready and investable for weeks. And where the founders hold the majority of the share. Um, you can now say, okay, how is this different to to to venture capital investment from the cap table? It's not. But the difference is that you in this case, you as a corporate initiate, uh, this startup, uh, but then typically give it to, to a founding team rather quickly. So that's the other extreme where the corporate only holds a minority share. And then the third model for me is exactly in between, you can say is, uh, joint venture type models where two or more, uh, corporate or strategic, uh, investors, um, share equal rights of the startup. Um, so that's the third model. Um. I've often seen a misunderstanding, uh, in corporate ventures, um, where the boards and says, well, we have 80% of the company or. No, we want to have 80% of the company. And let's find the investor that, that that takes 20%. Right. And I think many realized that this is not working because financial investors don't want a corporate to control the majority of company and then become an investor because they want, you know, proper cap tables set up. So this is, I think, one of the myths that many venture builders have seen at the beginning that these approaches don't work. So you either go in full as a corporate, then you need to fund full and to the end, or you make it VC ready. But then you can also only have a share of maximum up to 20%. And I think the two models are also very different. And just to mention a few examples. So first of all, I think the strategic intention behind building majority ventures versus minority ventures is very different. If you build a majority controlled businesses and you typically do this um, to, um, you know, in areas where you want to complement the core, uh, uh, and eventually spin them back in after a while. Um, while if you're building minority ventures, the, the intention is really to, to leverage these unfair advantages, uh, in a new business model, uh, that you then, you know, exit at some point in the future. So you basically want to monetize, uh, existing assets in new fashions while in the majority, uh, controlled ventures, you want to build new businesses that you eventually spin back in. Um, also and we we touched on this a little bit already. Um, also the building of the of, of majority or minority ventures is, is very different. So typically both you initiate both within the corporate venture studio. Um, but uh, for the minority ventures, you typically you are quickly, hands off. You're quickly, uh, either starting this already with the founding team or hiring a founding team. Um, and you're quickly incorporating this, uh, this this, let's say, uh, founder owned startup, while if you're building, um, corporate controlled, uh, ventures, they typically, uh, you found them much later, you're more hands on as a corporate and you're more operationally involved. Um, but again, the key difference is, as I mentioned before, um, the portfolio size. So, um, if you if you need to fund 100%, uh, of a venture versus 15 to 20%, there's obviously much less, um, uh, ventures you can build and fund. So, um, we see the portfolio sizes, uh, of venture studios that build minority ventures are typically much bigger than those building majority majority ventures. I think that the portfolio, uh, element, you mentioned it a few times already. It's key. And it goes back to what I was saying about risk. Also, the more the bigger your portfolio, the more you're kind of leveling, uh, the, the risk. So, um, based on, on what you just said and any, any idea what which model is, uh, is more is more relevant or, or works better for companies fully owned. Partially owned. Or mixed with other companies. Yeah, that's a tricky question. Of course. Um, yes, I think there's there's a justification for either model. Um, it really is a different attention, first of all. Um. When I look into the market, I think, um, we have seen the venture studios that build again, how I call them minority owned ventures. Um, I think they have shown that this model is working. So they have built well-oiled machines where they shoot out ventures, um, very quickly, and that are VC ready and investable by VCs. Um, so I think we've seen this model is proven in the market. I would say there's one challenge I personally see with that, it's, um, it may have become less relevant, strategically relevant for, uh, for the mothership. So while taking a very, uh, as I mentioned earlier, a very investor centric perspective how to build companies which was needed to attract financial investors. Um, the corporate mothership has been has been forgotten a little bit. Uh, and thereby the strategic relevance of what these venture studios build. So you can say it works operationally, strategically relevant question mark. And, uh, if you look to the other model on the other hand side, um, it's it's more complicated to build a well-oiled machine if you're building majority controlled startups because there's just more things you need more complications. Right. And, uh, I don't want to go into the details of consolidation of these companies into the, the, the balance sheet of the mothership and other things, uh, or attracting talent. But this is much more complicated if you build majority controlled ventures. On the other hand side, you have the chance to, you know, to build stuff that is more relevant for the mothership than, uh, let's say if you're just building minority ventures. Cindy. Can we. Sorry, sorry. Yes. Go ahead. It seems that it's a choice. It's. It's really a strategic choice. And the intention you put into building ventures. Do you want to build your next S-curve and, like, maybe it becomes your next core business or it does complement your really your core business and accelerates it? Or do you want to build financial assets that you then monetize to maybe feed your core business? So it's really if and you know, that's my understanding anyway, I don't know if I got to write what you said, but that's, uh, kind of a what intention do you set at the beginning from a company perspective? I would say so, yes. Yeah. It also went into the same direction. I wanted to ask, uh, is there a correlation between the the shares you own versus the, um, the proximity to the core business? So if I build something new, very close to my core business, then maybe the the shares I own are much higher, 100% or whatever, but this is more like the next S-curve for I had ten years ago, uh, into the future or whatever. Then maybe, uh, the shares are only 20% or whatever, because I need more. Yeah, more innovative people from outside thinking beyond my core. This is do you see also this correlation or is it. Yeah. I mean, it's obviously not not that simple and not completely black and white, but still, I would say there is a tendency towards this. Yes. The more strategically relevant the business is for the mothership, there is a tendency to control, to want to control it. Um, while if it's not as relevant, um, there might be a tendency to, um, to have it a little bit further away, uh, from yourself. Um, it it depends often also on the very specific situation. So, uh, from my own experience, um, I can say we had we had one initiative, for example, where we have, um, there's a strong connection to the IP of the mothership. Um, and that's something no one wanted to be floating to the outside world. Uh, were were not fully in control. Um, so that was one aspect. And then another aspect where we said, um. We. The topic is interesting in the long run for us. Uh, but maybe not so much in the short run. And there's also little we can do to make the venture better in the short run. So let it be rather independent. Uh, let's let's watch the market. Uh, how the market evolves. Let's see how the venture involves. And eventually, uh, you know, we learn with that. And, you know, there's always a chance to, uh, to invest more in the future. Um, but it's more a learning case than, uh, which can be strategically relevant in the future, but not in the short run. So there's also a time dimension probably to it, I would say, or maybe also an HR perspective. You briefly touched it with talent acquisition or talent attraction. Um, so if it's more closer to the core, then maybe you can bring in your, the people from, from from inside of the core, from inside of your mothership. Uh, because you have also talents there. And who wants to become the next entrepreneur in residence for this venture? Or. But if it's more, uh, far away from the core, then maybe you need to attract different types of talents you don't have as a mothership. So then they also demand more control of the and more incentives. So how do you see this with the talent attraction and incentives? Yeah, yeah. That's obviously one of the most challenging topics. Um, as a corporate venture builder. Um. So for the Minority Ventures or founder of ventures, it's simple. Right. And if you have set up the venture, right, if you have set up the cap table, right. And if it's generally VC investable, um, I think it's, it's, it's, it's for a corporate venture. It's as easy or as simple to create to get great founders as for any other startup. Right. And the incentivization mechanisms are the same. So it's like a real startup, if you will, with the only exception that it's initiated by a corporate. And the corporate holds a first, let's say seed investor or pre-seed investor share, um, either real shares or convertible loan, um, of let's say up to 15 to 20%. So they're it's like in any other startup, right? Um, and I think there's, there's good ways to get good founders for these things, uh, because they will look at the cap table, uh, first of all, and the top and the product, of course. Um, now for majority or corporate controlled ventures, it's a completely different game, right? And, uh, um, I've, I've experienced it in many cases. Uh, I have built in the past getting a real founder type talent to, um, majority controlled corporate venture is, is very unlikely. Um. But it's okay. I would say there is. You can attract other great talent, and talent seeks out to these companies. It's just a very different, let's say profile um and and setup. So typically I would call them not founders but employed managing directors. You hire at um at these majority owned corporate startups and they can partially come from the mothership. Uh, in my experience, uh, with mostly hired them from the outside world, um, because you need this ability to, you know, to build, um, a new business from scratch, uh, like a startup. Um, so there's different, let's say, talent requirements that you need to have that you typically don't have, um, let's say in your, in your line job, uh, within the corporate. So, uh, if I look back to the ventures I have built, um, that were majority owned, um. Probably still 90% of the talent were hired from the outside world. Um, so little come from the mothership. Um, some come and some are those who came. And those that we have are critically needed because that very often subject matter experts in this specific field, for example, cyber risk, uh, expert. Right. So there's great subject matter expertise in the mothership, typically, but maybe not always great. Let's say, um, yeah. Entrepreneurship people, let's say. Um, but it's also a different, let's say, um, how to say um, culture to some degree. So if, if you are, um, 100% subsidiary of a corporate mothership, um, typically, um, the corporate is a bit more hands on and operationally involved than, uh, in a startup that you invest in. Um, so as, as a, as, you know, as six alls of a of a majority corporate startup, you are less, uh, in control of your full destiny. Uh, um, and you need to be able to manage also, uh, a complex stakeholder landscape at the corporate level, which is a different requirement than, you know. I mean, managing your investors, we see investors can also be challenging, of course, but it's just a different type of, let's say, stakeholder landscape. And thereby it requires a little bit of a different, um, of a different, um, capability set. Um. Now we can also talk a little bit if you want about Incentivization because that's that's, uh, naturally the next topic. Uh, after attracting talent, how do you incentivize talent? Uh, in corporate ventures? Again, for minority owned ventures? It's easy. It's like in every startup the founders hold the shares. So that's simple. In majority owned ventures, it's again, also more complicated. Um, you can um, I have seen models for, um, the founders or let's step on one step back. What's the complication? So the complication can be, um, it's, um, the if you give if you give, um, um, an employee managing director shares there's typically not a liquid market for these shares. Right. So who do you sell these shares to? Uh, no. Financial investor will buy 5% from a founder who wants to monetize their shares if they get 5%. So there's the problem of liquidity of this, uh, of if you give, um, a founding or a managing director, let's say 5% of the company. Um, so there's two approaches. Uh, I think that, uh, became popular. Uh, both have advantages and disadvantages. One would be you give an employed managing director real shares, um, typically, uh, with a put option to be sold back to the corporate, uh, if certain milestones are met after a few years. Um, um, this, um, so this is a possibility. Um, there might be a tax challenge when granting real shares, but there's also ways to, to avoid this. And then the second, uh, instruments that I have also been using a lot in the past was Ukraine. Uh, um, not real shares, but some kind of long term incentive bonus that mimics, uh, virtual stock options. Um, so it's something that where you don't have real shares, but you, you benefit from an exit event. Uh, right. By participating in the value that you've created. Um, um, it's, um, it's a simple instrument, but it also can come with some challenges. Um, um, one is it must be taxed as, uh, as income, one being paid out. Uh, so that's a challenge for the managing directors. And the second one is it. And that's now going to completely into and to the complicating details. But um, and this applies for both is as a corporate startup, uh, you need to also demonstrate those, um, let's say share programs. Uh, in the balance sheet of the mother ship, um, which can be, uh, um, yeah. Painful. Uh, if you need to do this, because that's something typically the mothership doesn't really like to do. So, um, it is a fact. The talent acquisition is also hard for, let's say, having those talents coming from the mothership itself. Uh, I also, uh, see that you, uh. I mean, finding them and seeing them. Hey, you have entrepreneurial talent is good, but they also want to understand. Hey, what is in for me? I'm now leaving the mothership. Uh, and now with a low risk job, I climbed up the career ladder. I have now a high paid job. I have a, uh, a fantastic outlook. Maybe in the next years, I can further climb up the career ladder and maybe become a director, or maybe becoming part of the board or whatever. And now you ask me to take over a high risk startup? Uh, I don't know. It will exist in the next 3 or 4 years. Uh, that I, I should build it. Of course. It sounds interesting and challenging and fantastic, but, hey, uh, I'm now leaving this secure space. Uh, so I definitely want to have shares. I definitely want to have more reward than than I would maybe see in the old area. So it's not just like giving them maybe virtual shares or whatever, but it's also hard to attract them. So I think right, right now what I see is also, uh, attracting the tenants from outside. So for those corporate startups, it's sometimes easier because all the, the internal tenants, there are talents, but you cannot really convince them with the right with the right model. Or do you do you see this challenge as well, or. Um, yes, of course. Um, and um. It is a challenge and a dilemma for the individual. Um, um, but I mean, you need in, in a if you have a three people managing director team of a corporate startup. Right. And let's say two come from the outside world and one come from the inside world. Um, this needs to be somewhat balanced as well. Right. You can't have completely different, let's say, logics of incentivization and also of compensation. This will create tension at some point. So you need to balance both worlds a little bit. Um, um, so what I've seen is for, I'll say, for 90% of internal talent, this is not the right move. Right. Um, because as you said, if someone is looking. Okay, how can I avoid further risk to move to the next, you know, career stage? Um, this might not be the right approach to do that because this is high risk, um, because it can fail on day two. If you jump on it day one. Right. So it can fail every day. Um, so you need to be really, first of all, passionate about the topic and about the product. Uh, you need to be willing to learn, uh, through and have hard learnings. Um, and I think it depends probably also a bit on the culture of the mothership. So if these things will be rewarded failure, uh, as a learning journey for the individual, I think then this is then this can work. But if it's seen as. Okay, uh, he didn't, you know, he failed in venture one, then he failed in venture two. There's nothing we can do with this person anymore. Then you will never see someone moving over there whatsoever. Um, I've seen, um, corporates, um, trying to build a bridge between the two worlds. And I'm still have mixed feelings about this bridge. So what is what what what do I mean with that is, um, you can there's two ways you can say. You can say if you as a as a corporate employee, if you want to go to this corporate venture, you need to leave your corporate job and there's no way back, right? If you're in, you're in, uh, and if it fails, you're out. Right. So that's the most the more radical way, uh, which mimics also, let's say, market mechanism in, in its best way. Um. However, if corporates who do that realise their single, there's a single corporate person doing this right? Typically zero. Um, so that's why some have built a bridge. So, uh, they mimic, um, you know, real startup scenarios with new employment contracts, uh, new bonus systems. But for a while, there is a bridge back to the mothership. So, for example, if you say, um, um, if if, um, within the first two years, um, the startup still exists, and, um, the talent from the corporate, uh, still want to, you know, wants to remain there to get the bonus, uh, in year five. Um, uh, then there is a bridge back in the first in the first years to go to the mothership, uh, in the sense. So there's ways that you can smoothen things for corporate talent. Um, but it remains a complication. Um, that's I think that's that's that's reality. Yeah. Maybe. Um, now, looking out, you mentioned earlier, uh, three stages already that, uh, corporate venture building has been through or the, the, uh, the maturity stages. Um, what do you see as the next phase? How how can corporate venture building remain relevant or become more, even more relevant? What's your take on this? Um, yes. Um, so I'm a believer. It's it will remain relevant in the future, first of all. Um, but I think we are at an inflection point where we see maybe even the fourth evolution stage, um, happening at the moment. Um, and I mentioned earlier in stage three, we have seen this very investor centric perspective, uh, and venture Studios, having created well-oiled machines that are with market ready, we see investable startups coming out of them. And but maybe with, um, by sacrificing strategic relevance of those startups. Um, so looking ahead, I think my, my, my outlook would be that, um, corporate venture studios that create highly strategic, relevant businesses for the mothership, um, uh, will become more relevant. Um, and also those that have cracked the dilemma of being operationally independent from complications of the mothership or being strategically highly integrated. I think those who master this, uh, uh, let's say contradiction, uh, will be successful in my perspective. And then the second scenario I see is that you also indicated Matthias earlier, is that we see some venture studios pivoting more to become AI product studios. Uh, because this seems to be, let's say, in the short run, even more relevant to build AI products and use cases by using these venturing techniques, uh, and sandbox environments, then building new businesses. But again with, I think, um, um, um, with Europe and companies in Europe, uh, if they want to remain competitive and future proof, uh, uh, going forward, uh, we all need, need to find, uh, back the path to growth and innovation. And I think with the two things I mentioned, more strategic, uh, businesses and ventures to be built and using venture building techniques to build AI product studios. These are the two scenarios, I think, uh, that corporates can may head to, uh, to, to go back on the growth path. Um. Going forward. I think this is a very good outlook, so it stays relevant, but it will also, of course, change. Um, so I think you covered a lot of great elements of corporate venture building. So we we learned a lot, um, how it has grown in the last years, but also what is right now the, the, the challenges of corporate venture building and especially with incentive ations and strategic, um, direction and stuff like that. Um, but um, also the outlook with AI coming in and how I can shape or is maybe an another battlefield for corporate venture buildings and they can maybe a bit of, uh, spark also in this AI direction. Um, so thank you for sharing your, your experience and your expertise on this whole topic. Um, but before we close, maybe there's a last question we always ask our guests. Um, it's about recommendations for kind of books or podcasts or other sources. You you think maybe they helped you in the last years and they inspired you, and you would like to recommend to other leaders listening to this podcast and, uh, to, to follow or to, to listen to, to read or whatever you think or to watch and uh, to, to to take away maybe also some learnings like what you have done. Yeah, well, there's many to mention. Um, but, um, what comes to my mind? Um, maybe let's start with books. Um, first of all, um, the last book I've read, um, called Moral Ambition from Rutger Bregman, uh, I think has been quite in the press, uh, in the last couple of months. It's not an entirely great book in itself, but what I really liked is about, you know, the message behind it's about, um, as a talent, uh, how about using your skills? Um, right. In the sense that how do you, uh, you know, use your skills to solve the big problems of humanity and life on earth rather than wasting your talent in jobs that, uh, are just, uh, filling the pockets of some privileged people. Um, so I like the message, and it got me thinking of how to invest my own energy, to be honest. And the book I'm reading, um, at the moment, uh, it's a new one from Harari called Nexus. Uh, it's it's the first book I'm reading of him. I'm always fascinated by his books. Um, so I'm just at the beginning of this, so I'm not sure I can fully say a lot about the last one, but, um, all books I've read from him, uh, have given me completely new perspectives on things that I have never had before. So I can definitely recommend all these books. The last one is about, um, um, the information age and how information has brought us where we are today and the relationship of information and and truth, which is, yeah, a very relevant topic, you know, giving, um, um, you know, things we see, uh, at the moment as well, um, when it comes to podcasts, I'm listening to many, many podcasts. Um, so it's very difficult to pick out the best ones. But I would like to mention The Daily from The New York Times, which is more political podcasts. Um, but every episode I listen to them. I'm always fascinated after I've listened to it. So it's typically it's one specific story, um, where they go deep into the topic, uh, understand the situation and the root causes of things. And, uh, it's always yeah, I've always learned something by listening to to this, to these episodes of the podcast. So I can definitely recommend The Daily from The New York Times. And there's maybe one other thing is, um, which is a bit more relevant, maybe to the topic we talked about is. Um, the learnings. Um, so as a corporate venture person, there's typically, um, little people within the company that you find that you can talk to that, uh, you know, know how to do things better. Maybe they know about subject matter, of course. Right. Cyber IoT. They're perfect experts there. But how to build your well-oiled machine is something you don't find within the company. So exchanging with your peers. Um, um, talking to external experts I found always very helpful. And there I have learned a lot. And that's why I, you know, entertain these exchanges quite a lot with other companies because they're I, I learned a lot in my past. Yeah. I think this is, uh, absolutely true. That's why we also invite experts like you on this topic to exchange and also to not just that we are talking to each other, uh, via a video call, but also to record it, to make it available for the audience. Uh, so it's a win for us, but also a win for the for the audience listening to this conversation. Martin, thank you very much for joining this podcast, this recording, very insightful information. And, uh, we will put your recommendation on the books and also the podcast into the show notes and also link to your LinkedIn profiles. So if anybody wants to connect with you and maybe continue this conversation, then, uh, he can, uh, connect to you, uh, I'm sure. And yeah, uh, looking forward to the published version and very soon. And thank you for joining. Thanks for having me, Matthias. Anatoly. Thank you, Martin, for this very interesting and thorough uh, uh, content that you gave us a pleasure. Thank you so much. All right.