Picture this: it's 2013, and Cisco Investments announced a commitment of placing $100 million toward an emerging technology called Internet of Things (IoT). Still, the challenge remained: what's the market opportunity?
"And so we said, 'let's learn about the market by deploying venture dollars to it,'" recalled Cisco’s Head of IoT Venture Investments, Amit Chaturvedy.
The return on learning has paid off. Since then, about three-quarters of that $100 million fund have been deployed in twenty-five IoT startups and four early stage IoT focused venture funds. The investments have "really informed our view of the world in terms of how IoT is evolving, different business models gaining traction, use cases, and the hardest of problems to solve in IoT," he said. "We've seen the IoT journey play out and have now a credible IoT platform, and we're continuing to build on top of that."
Chaturvedy and other tech leaders spoke at the panel discussion about the various ways they're capitalizing on emerging technologies. The panel "Corporate Strategic Investing and New Market Potential: IoT, AI, and Robotics Explained" was part of the 2018 Global Corporate Venturing and Innovation (GCVI) Summit held in Monterey, Calif.
Co-investing with competitors
When it comes to emerging technologies, especially in the areas of IoT, artificial intelligence (AI), and machine learning (ML), venture capital firms are on the same page: exploring if these technologies work or not, looking for market validation and if the models can scale up. That's why co-investing with competitors is a common practice—it's necessary to get the ecosystem growing.
"I think we'll just partner with anybody and everybody that's willing to do it," said Chaturvedy. "A lot of scaling up in this world is around execution by the startups and energy their venture investors bring to the mix, and so the more you're able to hedge your bets out with different corporate venture groups the better positioned you are to succeed."
Focusing on thesis-driven investing and relationship building
Investment isn't always about the dollars spent but about seizing the right moment. That's why a thesis-driven approach is the most effective way to identify promising startups that are leveraging emerging technologies. Chaturvedy cited the investment in Kespry, a company that produces drones to help industries like insurance, construction, and energy with gathering aerial-based intelligence.
"It was just waiting and watching for the right moment to get in," he said. "You can't always control that timeline, but you need to have that thesis defined upfront, and companies identified that you want to invest in.."
Same goes for generating value—it's about building relationships with portfolio development, not about funding a specific amount.
"And as we close deals, we kind of hand over the relationship to them (portfolio development) in a way and say, 'Please help us. Help generate relationships and values,'" Chaturvedy said. "That's one of the value-adds for our portfolio that I think resonates really well with our portfolio."
Recognizing challenges as opportunities
AI, machine learning, virtual reality, robotics, blockchain and others are being seen "with the same sort of lens as was IoT three, four years ago," Chaturvedy said. "AI and machine learning are in that phase now and so where should we be placing our bets, and then what happens in three to five years is, I think, the interesting problem that we have in front of us."
It's not about being discouraged, but rather, it's about understanding that it's going to take time to research emerging technologies and figure out their applications.
"The fundamental problem for IoT today … is the go-to-market, which is not an easy problem even for a Cisco to solve. I mean, we struggle with it every day in different verticals," he said.
Cisco Investments studied drones for three years before identifying that Kespry had the "right building blocks and enough proof points in terms of customer traction and the solution actually resonating with customers."
"And so we're starting to do that in the industrial wearables space," Chaturvedy continued. "We're starting to do that in robotics; we have a few companies identified in those areas that we would love to invest in."
Investment in emerging technologies takes not only dollars but also of time and energy to solve challenges alongside the startups. Co-investing with competitors, applying thesis-driven investing, and recognizing challenges as opportunities are the ways to navigate a tech landscape constantly populated with the next big thing.