Highly impactful and effective companies can now be built faster and for (far) less money than they could in the recent past, thanks largely to technological advances (hello, AI) and greater access to startup capital.

Many corporations recognize this innovation opportunity is one worth exploring. More to the point, they know some business, market, strategy, and customer problems can be solved by creating their own startups.

But a focus on Horizon 1 and 2 innovation initiatives tied or adjacent to their core business holds them back.

That’s why Alloy Partners General Manager Matt Brady and Build Director Colin MacDougall dedicated a recent Innov8rs Learning Labs webcast to this exact problem facing large corporations today.

How can they balance incremental, sustaining improvements that help them hit near-term revenue targets (and appease board members and investors) and explore new growth avenues?

It’s not necessarily hesitancy or refusal preventing large companies from exploring venture building today.

Rather, as Colin said, it’s simply that C-suites must understand that “building businesses that are, at first blush, going to be very strange for them to launch are actually, potentially, exactly what they need.”

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Key Takeaways

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• Matt kicked off the conversation by noting how “the single most important prerequisite for growth and innovation is your own corporate strategy.” However, in listing the four key principals of any successful venture-building approach, Matt noted too many executives undervalue and underutilize external venture creation as a viable tool when executing against their growth strategy.

• Colin noted how retrenchment to the core, CVC investments, and M&A activity are, rightfully, go-to innovation levers for large corporations (and have been for some time). But he added thinking beyond horizons one and two and focusing on market penetration — and even new-market creation — enables scaled enterprises to create fundamentally new S-curves with high growth potential.

• Through a dedicated corporate-venturing program, Matt indicated large companies can not only stand up venture-backable startups with strong product-market fit, but also become first customers and investors in those businesses and share customer data, internal resources, and market insights with them. This, in turn, gives startups the best possible chance to succeed.

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Watch the entire Innov8rs Learning Labs webcast to discover why so many scaled enterprises are embracing venture building today and the importance of aligning strategic business goals with startup creation.

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Transcript

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Matt Brady: I want to thank you all for the ability to speak with you today. We are really excited about this conversation and we look forward to your thoughts and your questions.

We'll answer some of those as we move through the presentation. But we also want to save some time at the end to circle back to questions and just have a rich dialogue, if that is, is helpful. Again, my name's Matt Brady. I'm a General Manager at Alloy Partners, and I'm joined by my friend and colleague, Colin MacDougall.

Our company, Alloy Partners, specializes in building startups with corporations. Together with corporations, we identify problems. We build solutions, we diligence them, and then we launch entirely new startups.

It sounds very strange, and it's certainly something of a magic trick to co-create startups with large companies, but we believe that startups are an amazing tool to solve problems within a business and potentially across entire industries.

To date, we at Alloy Partners have designed, launched, and supported 25 startups with large organizations, and we have many more on the way. However, today we're here to talk to you about the beginning of that journey and how you might evaluate your company's growth levers with a venture strategy.

We believe that the single most important prerequisite for growth and innovation is your own corporate strategy. So, to frame our discussion more simply, we're going to be talking about how you can advance strategy with venture building. So, we can dive into it.

We want to begin by talking at the highest level about the promise of corporate venture and some of the inherent challenges that companies face.

Many of the companies that we've worked with over the last 15 years in the strategy side of things, and certainly the companies that we've been working with in the last four years, as they think about venture as a new lever — this is a subject that we are very passionate about, and I don't want to get carried away.

Our aim is to convince you of four things. We found this to be true after 15 years of doing this in either corporate strategy, innovation, or venture capital context. So, we're going to cover all of this during our talk, but we wanted to hit this all up front, and our four principles are as follows:

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• One: Corporations undervalue venture as a tool when they're executing against their growth strategy. Maybe more to the point they might pursue venture, but they look for it in the wrong places.

• Two: Corporations should use venture to solve very specific and intractable problems that limit progress against their strategy. There is, of course, a time and a place for moonshots, but most companies are not in the business of churning out moonshots in a repeated fashion.

• Three: Corporations should bring a very selfish lens of advantage to their ventures. They should be asking questions like, ‘What can I provide a startup to make progress and what's in it for me?’ And the question around, ‘What's in it for me?’ is very rarely around financial return on venture investment, which we'll talk about later on in the conversation.

• And then number four: Corporate venturing must start by looking inside at the needs of the business. But if we are being honest the corporation must also consider launching a solution outside of the business for maximum effect.

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Why do we believe so firmly in these principles? Where did they come from? Our perspectives by deep experiences working on strategy wherein innovation and plans for growth and creating the new, unfortunately, they often fall apart.

So, here you've got a picture of Clay Christiansen. He was the Harvard Business School professor that researched a phenomenon that he called disruption. Colin and I worked for Clay at his strategy consulting firm, which was called Innosight, based in Boston, Massachusetts.

I worked there for nine years helping Fortune 500 companies like Ford or Aetna Craft Strategies for growth and innovation strategies that might either embrace disruption or they might try to stave it off.

And what Clay wrote, that we come back to time and time again, is what you see on this page. When disruption strikes, good management itself is the root cause. The very decision-making and resource allocation processes that are key to the success of established companies are the very processes that reject disruptive technologies.

So, to put this in a very simple way, the things that make your company great are the very same things that will not allow it to grow and innovate in new ways. A consultant's answer to this problem, and we've been guilty of this over the years, an answer to this might be to build new processes, build new capabilities, build new management systems, and you all probably have done that.

You've probably gone through the tortures of the damned to make progress against your strategy, but we would argue that in some instances, it's actually easier to tool a new startup than it is to retool an established incumbent. It's a lot easier to maneuver a startup than it is to change a Ford motor from the inside. And it might be that the best way for you to gain new capabilities is to create or to foster a startup.

Now, in theory, corporations and startups should go together like peanut butter and jelly. Unfortunately, the reality is that while startups might in theory be complimentary, they often miss the mark for corporations in a number of very important ways.

Corporations want to make progress against their strategy, but startups can't guess what's in their heads. Startups might be focusing on an objective that doesn't quite meet the mark. It doesn't matter enough for a corporation to hire that startup. Similarly, corporations have unbelievable and unique strengths, insights, advantages, resources, but startups can't possibly think about accessing them.

And then those amazing strengths of a startup, the thing that we romanticize in the venture world, the ability for a startup to focus and to learn to pivot, adapt. That really can't be adopted by corporations very easily. The reality is that there's just too many barriers. There's too many antibodies within a corporation to make hiring an existing startup really easy.

There are too many unknowns within a startup to ensure that their services are truly valued by a corporation that they are pursuing, that they want to have as a customer.

And so this is the work that we do at Alloy Partners. We bridge that gap between two mismatched entities by creating startups, new startups that can complement the corporation that we are working with.

By working together, instead of thinking of these as two different camps, we're able to co-design a blueprint or a startup that's truly bespoke. A startup that can actually move the needle for an established company and hopefully hundreds of other companies that are like it.

So with the way that we operate the priority of a corporation, it’s strategy.

They can become the singular objective of this startup. The unique advantages of the corporation can be brought into the startup, helping its scale with speed and efficiency. And then finally, the value that that startup creates to be hired by the corporation to make progress against what matters most, which we believe are the problems of the corporation itself.

So this creates something of a virtuous cycle between a corporation and a startup with deeply aligned incentives and deeply aligned insights between the corporations and startups. This is why we exist. We believe, unlike many folks in the venture community, perhaps counterintuitively, we believe that corporations have the right to win.

As the world is changing, and as corporations are trying to adapt, they still have the right to win. It's just really hard to go it alone. So this isn't about the old framing of David and Goliath. This is really about David and Goliath teaming and joining forces. We would just argue that you might need to build the Davids first because they might not exist.

So I'm going to hand it off to Colin to talk a little bit about the growth levers that already exist within your businesses, and they might inform some of the choices that you have as you think about advancing on your priorities and think about venture potentially as a new tool for innovation. 

Colin MacDougall: Thanks, Matt.

And so, what we'll get into, right, is, is a little bit of how we descend from that strategy piece into where the specific lever is. And just to be clear, we're, we're talking about one lever, right? One of a bunch of tools in your toolkit that we'll get into. And I almost think of it like the Swiss Army knife.

There's a bunch of functions on your Swiss Army knife that you've probably never touched, but there is a fish scaler in there should you ever need it. and knowing what each of those. Actual functions are for, is really important to getting everything out of the, out of the actual opportunity there. So, to get into this a little bit, when we think about strategy and what venture means to outlets just start by talking about what strategy is and, and the ways in which the tools we have are somewhat limited, maybe by ourselves.

Just to start with a premise. Every company has a strategy in some form. It's not always documented the same way. It's not always represented with the same structures, and, and that's actually great. Doing good strategy work is very difficult. but the skills to do it have been in the world for a long time.

There are many iterations and turns of that crank. I don't want to undersell the importance of doing that work and doing it well. But, for the most part, your large, successful firms are probably mostly right in their strategic vision on paper. The really hard stuff is in the specific tradeoffs and choices that come later, and we've spent a lot of time with these tools in different circumstances.

And so just to hit a couple of these and, and highlight where some of them are the challenges show up that you may be familiar with. So one of the classic ones, Three Horizons, McKinsey Growth Framework, really breaking things out by investment in growth over time. That first one, you know, zero to three years too.

Definitions vary. Second one might be out to seven years, seven and plus for third. You could argue that those are all being compressed a little bit given the way that just everything moves faster now. but I think the important thing here is that when you're thinking about long-term growth and you think about change, the story for horizon three has often been, oh, we need to make a lot of small bets.

And our future businesses are out in that horizon. And I think that when you put that into the context of corporate venture, one of the ways that that was always limited was if you make these kinds of earlier stage bets in horizon three, if you're really lucky, if. Within about five years, you'll get to acquire that and you'll have to spend much more money on the acquisition.

It's not the only way to do it, but it is often how that looks, part of the result of what gets often called sort of the, the sort of pressure of today or the tyranny of the urgent, is that you will end up focusing on horizon one and two. And that's not a bad thing by itself, right? That's the nature of the optimization function.

That is, a corporation that is that good at management in a way. Now, is it limiting? Yes, but that's what we want to try to help to talk about bridging here: dual transformations. This is one created by our friends at Innosight. Simple frame, but a really good one. The basic premise here is that you have to reposition your core, your existing businesses in and you have to build new businesses over time.

That's B, and then that there's a set of shared capabilities that makes both of those transformations work in C. Everyone who's worked in this knows that there's so much work that you have to do in A, that B starts to feel abstract and like you might never get there.

Matt Brady: We would argue for a portfolio view of problems, a portfolio view of potential solutions. To your point, launching one startup might move the needle for your business, but it might also be risky. We would argue for more shots on goal, again, with, with the focus on your strategy, with the focus on your problems.

But by looking at the entire portfolio of problems, you might be looking at a portfolio of startups that could, that could more appropriately move the needle and de-risk any investments that you're making in the venture. 

Colin MacDougall: And, and just to, to build on that, the, it really comes down to that, like the unit of analysis for it too.

Like, if launching a startup is your plan for building your B business, right? This new business, that one shot on goal is probably not going to be sufficient to, you know, your risk-adjusted expectation of the future. But that's like having that very granular definition of what's the problem you want to solve for it.

And potentially taking more than one path to try to solve that problem. Yeah, realistically, any of these problems that you picked, there's probably somebody working on how they can solve it today internally, but it might not be making the progress that you want to. So we'll definitely get more into that.

But portfolio is the right view for pretty much all of this. I totally agree. So last one here. This might be a little bit more theoretical looking forward, but you can definitely see it looking backwards. It's also related to the granularity of the growth concept. Markets plateau, right? The core markets that you are in get to a state of steady state growth that usually looks like competition, compressing margins.

Growth flowing to the rate of inflation and folks looking for a new place to grow. You want to get on a steeper learning curve. You want to get on a steeper growth market, something with more momentum to it. That always sounds great, but if it's truly a new curve and if it is that steep, it's going to be painful to try to get onto it.

And so when you think about a scaled firm getting on a new growth curve it usually requires elements of new business models. and they're relatively. Like, truly new curves that no one is on in the world. Somebody is trying to solve somebody's problem here, but it's important to know that somebody else was born on that curve that you are trying to get onto.

And that's part of how we can think about how, where this gap might show up.

The question here is like, ‘It’s going to be harder to get onto it, and it's ultimately that same curve, right?’ These limitations are generally framed by the innovator's dilemma, the sucking sound of the core business, right?

Like, all of those things that sort of ultimately draw the attention and the resources. And if anything that's accelerating, right? Everybody hears every day about new versions of AI. It's great that Claude can play Pokemon, but the bigger question is, 'Can it do a whole bunch of our jobs?'

High expectations, variable results, hard to plan. Regulatory uncertainty looming every day, hard to make investments. A lot of corporations that we work with have had this problem lately. I'm not actually sure which version of next year's business I should be planning for and investing in, and this.

At least in the U.S., this trend of layoffs has been on the rise for a couple of years, and a lot of forecasts are expected to accelerate. So in that world, where, you know, these things are hard to bridge, it's hard to get to that execution of strategy. The pressure on today is only growing.

That only makes the innovators stronger. But the fundamentals are still true, right? You don't know the future. You never did before either. That's okay. It's good. Even so you can focus on what you do best, right? That core, those businesses you have today are where most of your resources, most of your focus should be.

Putting those resources into it just makes sense, but reaching for the levers that you have is the important thing. The big thing we want to flag is that it is possible to look at this and say, those levers have always been a little bit over-circumscribed, limited in different ways.

If we want to talk about all those things in horizon three, new growth curves, all of that, the actual right way to get to those is not to build that business out in the distance, but frequently it's about actually moving the mass of your business today into that new market, into that growth curve.

And it actually has to start by solving very tactical problems today in whatever that business might be. So. Just to pull up some, some classic levers here for any of those strategy goals you might have, you have a couple of options, right? Build, partner, buy, same as it ever was. This is, this is kind of the classic set.

You build it internally. It's good for building foundations. It can be a bit more expensive, sometimes maybe slower, but can pay off over time if it becomes internally partnering. So call that vending a solution in contracting for something. Other kinds of partnerships can make sense if it's a really well-understood problem and a well solved one can be pretty quick.

It can be a really great option, but it's not always possible that that solution is available. Or, if it's available, it's solved for somebody else and not quite for you. Finally, like the, the nuclear option of levers here is acquisition, right? Is it a buy? So when you look at that, right, it is the highest profile, which might be a pro or a con.

It's also the most expensive in most circumstances. Also, the riskiest, if you're going to talk about sort of total capital to what your risk is. It's important to broaden this a little bit if we're really being honest about it. The first lever and sort of the default lever is just to do nothing.

In many cases, even with an explicit choice to do something this is where it starts, right? Analysis forever debate because there's no clear good answer. It's an act. We're not saying this to be critical. It's just really hard to start. We've been there. Um. But then want to also look to the other extreme and talk a little bit about this venture lever.

Now, we mentioned that there's often this story and the trade-offs here of what it would mean to use venture. It often seems a little bit more pie in the sky. It often seems a lot further away. I think part of that is that this lever has been used in a lot of different ways. Some of those have led to more disappointed leadership teams than really happy ones.

But I think as we look at that one, I, what really helped to bring this to life a little bit is just looking at this sweep with a, a pretty recent case for us. So worked with a, a large health insurance company. so your question on same as C, we'll get a little bit deeper into this. That is one of several parts of it.

That's right. So, to take an example we're working with a senior leader at this national health insurance company trying to work on new kinds of care, new kinds of benefits. and ultimately this senior leader was. Absolutely committed to the idea that doing nothing, was it not acceptable?

That was not a real option. and that building might be possible, but would take too long and would be the most expensive version of doing it. An acquisition was kind of inappropriate for it, so it left us with a partner and venture. And so a lot of what we spent our time on is really. Building out what are those counterfactuals, what are those possible venture answers versus the partner ones?

And so we'll get down into a little bit more of how that works. But the venture lever itself is complicated. It's not one thing. and Matt's going to talk us a little bit through versions of that. 

Matt Brady: Great. Thanks, Colin. And it's so interesting, even on the breakout just a few moments ago, someone on this call was talking about how their company had actually engaged with a venture fund with the hopes of pulling in some of the capabilities of the startups to help solve some of their business problems.

Despite the fact that this fund has made over 100 investments, they're struggling to find one of those startups that can actually add to the day-to-day business, right? That they can really engage with to help solve the issues that they're dealing with.

And so we need to think about the venture world a little bit differently because as a category, it's actually too broad of a brush for corporations. It's actually a subset of very different types of opportunities. Different types of opportunities to invest or to partner or to improve your business in some way.

We think that the best way to think about venture is actually on this maturity curve that you see on this page, and this tells us really how ready a startup is to impact your business.

Now, a lot of corporations actually start at the top of this curve with late-stage startups. Here, they often do use CVC to invest in startups. That is the most likely tool for how you are going to engage with a very big startup. They want to place these CVCs, they want to place big bets for the future.

The goal for CVCs at the absolute highest level is to invest for strategic and for financial reasons. But if we're being honest, most CVCs Aachi achieve neither of those goals, unfortunately. The reality is that at that stage, costs are very high. You are chasing big deals. You're going up against institutional investors and huge check sizes, and your ability to control that startup is quite low because of the size in the scale of the startup itself.

Many companies will also look to the middle of the curve with mid stage startups and that might be where that fund is focusing. Here, we've got startups that have had some success. So, corporations want to tap into that success. That could be by partnering with the startup, or again, by, by making an investment via a CVC.

Unfortunately, most companies find that this space also misses the mark for different reasons.

Usually, corporations find that the startups in that area don't quite accomplish what they need. Every company that we have worked with, whether it was when we were consulting or here at Alloy Partners in the venture world, every company that we've worked with will tell us about how they've engaged with a huge long list of startups at the mid-stage.

And, after a few years, they usually realize that the solutions of that startup, they're about 60% right for the problem that we're trying to solve. It's not all the way there. And so we're probably going to give up on them. It's this revolving door of trying to work with a startup, it not being quite right, trying to work with another one, it not being quite right.

And that can become very frustrating either for business units that are trying to hire a startup to do something, or for CVCs that are making, you know, shots on goal and just not getting what they need. So interestingly, we found that most companies actually don't look to the early stage at all. this might as well be a completely different world than the other stages of mid or late.

And we actually think that this is the most promising space to play in writ large. It's hard to find companies in the early stage, and, and that can be a problem in and of itself. They might be too small to know that they even exist, that they might not be on your radar, but if you do find them, you might realize that the clay.

That startup is still wet enough that you can shape that startup to suit your needs. Or what we have found is that that startup might not even exist. and in that case, you could consider building one yourself. At that early stage, startups have the ability to solve your problems, and here you can actually act something as a co-founder.

Of that startup by creating startups that are, that are truly purpose built. And by focusing on your problems, you can start to imbue that startup with advantages while solving your own problems, that earlier virtuous cycle that I was talking about. and there are many forms of advantage that you could actually create by looking to the early stage instead of looking to the late or middle stages.

The first thing that I want to emphasize, and this is, this is I think quite important, but you, you can create startups yourselves. and the very act of identifying a problem in your business is a form of diligence, and you cannot underestimate that motion. Most startups take years and years to identify a market need.

You could actually identify and validate that need in the matter of weeks because, as Clay said, you know your business better than anyone. but there are other forms of advantage in addition to just diligencing the idea itself and focusing on your problems, and we try to bring these advantages into our startups with corporate partners, and we want to illustrate a few of the really biggest ones here.

Once a startup is created, you can hire it to solve your problem. So, most importantly, this means that you now have a solution working on cost, working to reduce friction, working to improve efficiency within your business. Now, that's wonderful for the startup itself. They get to be taking advantage as well by having a large corporation potentially as the first customer, which will make them relevant.

You could act as a channel partner. You could give the startup access to unique data. You could act as a convener for a coalition of corporations within your industry. In all of these instances, by doing this, you are solving your problems and the problems of those that are around you within whatever value chain you might service.

So you get to be selfish as a corporation by playing in the early stage. And the startups get to be selfish too. They get to have you as a customer or as an ally. These are advantages that mid stage and even late stage companies would absolutely kill for. And the key to figuring out where to point this advantage is by being selfish and choiceful about the problems that you want to explore.

Colin can talk a bit about these problems. As illustrated on the left hand side of this page, but then we want to bring that into that portfolio view that you were asking about a little bit earlier, and think about all of the different ways that startups in the early stage might be able to act as a lever to make progress against those problems.

Colin MacDougall: And, and just to return to a question in the chat as well all along that maturity curve you could do traditional corporate venture capital, right? Find a company out in the world as a corporation. You invest in it, you make it investment at whatever round they might be, be into. what breaks from that traditional model is these dash lines, the, the, the places where you're actually building a new, uh.

Company that is not typically in the wheelhouse of your existing corporate venture capital groups. Some are starting to work with a bunch who do that type of work. Soit, it is possible, but that's why we have to make the distinctions right, is that you never have more opportunity.

You never have more leverage in a way than when you are starting from scratch. A lot of times when you see folks at that mid stage, they are, they're looking to see that the solution works before they're investing in it, and they will see a solution that worked for somebody else that might be exactly the same solution they need, but it might not be.

And so it might be too late in some ways. Certainly had a lot of certainly met a lot of folks who are frustrated with some of their startup partners because of that. and it's just a matter of timing. So let's get a little granular with this. Where would you start? I think the important thing here is that you're actually already pretty close to the right spot, right?

The core of business is the right place to be sitting and looking out. You might be familiar with this way of breaking up a set of possibilities, a set of options. It's just another way of thinking about how to, how to define unlike things. And then start to categorize them, right? So we break this out along with customers or markets.

So thinking about who are your most core customers, who are the sort of newer markets that you want to get into and who are entirely new ones, just to keep a couple of different ones group separate. And then on the business model or offering releases the product, the core is the business, the revenue stream that is paying everyone's checks today.

The adjacent is probably where you're starting to push on the edges of that, where new growth, new new types of products are starting to come on that. Don't quite solve the same. We use jobs to be done as a way of thinking about those problems. And then new is where you're talking about something that is different enough to the core, that it is actively painful to talk about doing some of that work inside of your organization.

Sometimes, most growth strategies will have some kind of articulation of whether we're building businesses across this map in some way. They don't necessarily use the same frame, but the premise is the same. So most of the time you end up looking at the core. There's just, there's always so much work to do in the core that that is a natural place to focus sometimes when laying out these strategies.

The thought is we've gotta put some darts into the far out area, and especially with venturing, right? ‘Venture, oh, it's this weird, fast-moving thing that no one can quite control, but is incredibly powerful.’ That's got to be the newest of the new. One of the things that I think is really helpful in breaking this down is to actually say, that's probably the wrong assumption.

That when you're looking at this from the perspective of the company, of the corporation that you're in. It leads you to look at these boxes a bit differently and potentially identify a whole bunch of different types of folks that might, different types of problems that might be in each of these. So when you organize your world like this, think about it from the perspective of the product team or the business that you're looking at.

Are they as core as core gets? Are they pushing at the edges or are they trying to do something really new and different? And that will lead you to separate those problems and define 'em a little bit differently. But the question is, for any of those businesses, for anything that they're chasing, what is the specific thing that's holding them back?

And that's only going to come from really getting deep with those businesses and those leaders. So when you're, when you're looking at this, right, this is just a generic set of a bunch of different types of problems that you could be facing, right? So that's everything from, you know, a runaway cost driver in the core.

So, you know, something that would feel like a very natural kind of, we have this process, we have this expense that we just can't get past, and it is preventing us from reinvesting in the business or we've got this pipeline. Maybe it is Horizon 2 and Horizon 3 investments that have been made over time.

I think this is especially true in life sciences. There might be some kind of adoption problem for not talking here about FDA regulation, but like they won't actually buy it. They won't actually use it unless something like X changes. Or even, you know, when you're thinking about building new businesses, sometimes you're creating entire new ecosystems.

Sometimes, you're creating entire new value chains that might require you to do things that are nowhere near what you have done historically. Corporations might need to be thinking about building businesses that are, at first blush, going to be very strange for them to launch are actually, potentially, exactly what they need.

And so when we're looking at this set of, of different kinds of problems, I think what was shocking to me in getting into this after doing a lot of corporate strategy and growth and transformation work is that building ventures like this, you would think they were much more pointed at the new and the transformative and what's actually.

I think maybe one of the most interesting things is that these kinds of thorny problems that you might actually target, you should consider a venture for. It's not your first option for anything, I don't think. But after a little bit of looking at it, a little bit of digging through it you might see a really nice fit between a specific problem that you're trying to solve and the advantages that a startup can bring.

All those advantages that Matt was talking about earlier. Ultimately, you're talking about things that will kill the actual growth platform, right? Either things that are limiting your growth, things that are creating expenses that will mean you have a, a, a bad result and and ultimately have to shut down a project, shut down a new business, shut down a market.

And it is these sometimes very tactical problems that you really can start with if you have this problem and enough other people in the world have this problem, athletic corporations have this problem. You might have the makings of a venture on your hand. it just, there's a handful of things we won't get into a ton of depth on 'em today that ultimately shape whether or not this is the right answer.

Let's just take three case examples, right? Because this is easy to feel very theoretical, but let's take the cost driver. So one of our partners-this is a year or two ago now. had this huge core expense of marketing compliance. It's a life sciences company, Fortune 500 pharmaceutical type company.

Working with them, we designed and launched a company called Revisto, which is using generative models to accelerate this medical legal regulatory process of, you know, generating. Processing, reviewing copy, and ultimately getting it out in the world. It's extraordinarily expensive, probably out of proportion to the value that it has from even a regulatory perspective.

And what's critical about it is that it's actually talk, it's all pointed at something that is tens of millions of dollars in direct expense every year. This is not a case of a startup that is waiting five or eight years to see if the, if it'll pay off, if the exit will come, you're actually starting to generate functionally an annuity.

Immediately, as soon as you're actually solving the problem, you are starting to take out this cost. It's not the first thing that people necessarily think of for what you would hire a startup for, but it's potentially very powerful. and in this case, having unique assets, unique data ultimately makes that a really, really compelling and advantageous startup.

If we're looking at the R&D pipeline example, in this case working with an agricultural life sciences partner of ours they were. Working on a bunch of products that were critical to reducing greenhouse gas emissions in livestock. And ultimately the thing that was holding it back was adoption.

they weren't quite ready to go to market yet, but the market itself might not be ready. What was needed was an actual functioning credit market for carbon credits that were going to ultimately be tuned to the specific needs of these specific producers in this case, ranchers or, or dairy operators.

That made that product, made that whole new market make sense. And so we launched Athian with them and it was able to convene large parts of our partner's customer industry, in fact, in dairy, to both be collaborators and uh, investors, and ultimately set a new standard that has made it possible to return.

Huge amounts of capital already to farmers in like in the context of, of carbon credits and also unlock all of that value that was. Heavily invested over years to reduce greenhouse gases in that product pipeline. And if we go all the way up to the edge here we're talking about some work we did with an energy generation utility company that was building a retrofitting, umpire plants for which they had a pretty limited high quality supply chain for sourcing and grading the fuel that they needed.

So they invested huge amounts of time and, and capital to, to retrofit these plants for carbon capturing. Sequestration, but the types of biomass that they were going to run these plants on ultimately should be a core function, right? But there was no existing supply chain for something like this at the level of quality that was required.

There are people who do have the kind of wood waste, the biomass that was needed. Those people had a very different problem, which was, I am a real estate developer, I am a commercial developer, whatever. I have a ton of wood waste from construction. I have to pay to get rid of it. I have a waste problem.

And so what we were actually looking at from the standpoint of a utility in the upper Midwest looking at and saying, I need to solve a problem for real estate developers in their waste management. It doesn't make any sense right on its face. Right? Like, like the idea that that was the thing that would unlock this problem for them.

It was huge, and it ultimately became the thing that allowed them to make sure that they would have a lot more resilience in that supply chain and the ability to actually get the value out of all these investments that they had made simply because the ecosystem didn't exist. So a totally new customer, a real estate developer, is a very different thing, a totally different kind of problem to solve for them or a thing to offer them waste management.

It's not what utilities do, but it's what was needed at the time. A venture is the only way that you would start to solve that from outside, from inside of a utility. So, um. I think one thing here, just to, to pull up really quick at the end here these came into the world to solve specific problems.

They were all less than $2 million in initial capital going into them. Um. They had immediate ROI and impact because of the types of problems that they were solving. They all build some future for each of these corporations. But they solve a problem that you could feel today. And that's what you hear in any, any startup, any venture investing world, if you gotta solve a problem that is painful.

Now that's what these are, and it means you're not waiting five and 10 years to get a return. You're doing it through the actual operations and solving a problem. so. It all starts with finding the right problems and Matt's going to take a little bit into what it looks like to start. 

Matt Brady: Sure. So I can wrap up with just a, a reminder on, on, on this page of what we were trying to cover with this.

You all, as operators within your businesses, you are inheriting or helping to create the growth strategy for your company. That gets turned into a number of different priorities where the company wants to make progress. Against its core or adjacent business models. Now those then get cascaded into different projects.

And as Colin covered, there are different levers and you need to treat the different projects in unlike ways. Some instances you probably want to build internally. In some instances it might make sense to partner or or to even think about mergers and acquisitions. What we're arguing for is that for some of those opportunities, some of those priorities, venture might be an appropriate lens, but we can't think about it as just one massive category.

Again, there are opportunities to invest. There are opportunities to partner within the venture community, or it might make sense to actually go out and think about building to solve the very specific problem that you are facing in your business. The questions you then need to tackle are, are we ready to do this?

Are we ready to take a step forward into venture? If we were, where would we build? Where would we invest? Ultimately to the question around the portfolio. How would we do this in a programmatic way so that we are making multiple shots on goal and helping to solve as many problems within our business as possible?

That is the work that we do. we, we help organizations get ready for this journey into venture. We help them think about what kinds of opportunities, what kinds of problems they would want to help, up within the business. If they are ready to move into venture, we can actually help them build, we can create and co-create startups that are based on problems or we can look at potential solutions that might exist within the company that might be ready to spin out.

But increasingly what we have found is that our partners actually do want more of a portfolio approach. They want our help standing up something of a semi-permanent venture studio. So that they can create a portfolio of solutions and help build out an ecosystem, within, within their space.

So we will wrap up there. We've really appreciated the opportunity to chat with you all.