What Corporate Venture Investors are Talking About

More than 1,000 companies now have corporate venture arms, according to GCV Analytics, a nearly 80% increase over 2011, and that number continues to grow.

More than 250 of these companies sent people to a conference in Sonoma, Calif., this week to learn to get better at finding and investing in new technologies, which are evolving faster than ever. Here are some excerpts of what they were discussing at the Global Corporate Venturing and Innovation Summit.

Caterpillar Ventures in May invested in Yard Club Inc., a San Francisco-based startup that lets contractors rent idle equipment to each other. LUKE SHARRETT/BLOOMBERG NEWS

1. Corporate venture capitalists and startup teams need to learn to talk to each other.

“It’s amazing that entrepreneurs can talk investors into giving them millions of dollars but can’t articulate what they do to people who want to buy their stuff,” said Mark Bercow, an operating partner at Bessemer Venture Partners, whose Silicon Valley venture firm tries to guide entrepreneurs on how to present themselves to potential corporate customers. Also, “we’ve had corporations spending 20 minutes defining what their problem is.”

2. The costs of starting a company–including logistics, manufacturing, marketing, and research and development–continue to drop, and software is getting more robust.

Since the Internet now touches nearly everybody, niche and specialty businesses can turn into large public companies, and older companies need to watch out. One young company, Casper Sleep Inc., launched in 2014 to sell specially designed mattresses and pillows directly to the public. It had revenue last year of $100 million, said NEA Managing General Partner Scott Sandell. NEA invested $5 million in Casper, he said.

3. Also, companies like Casper don’t need to be in Silicon Valley. (Casper is in New York).

“We [at NEA] fully expect to see innovation much more distributed across the U.S. and the world and are figuring out how to respond,” Mr. Sandell said.

4. Big companies need to anticipate what might happen to their businesses as technology continues to evolve.

Caterpillar Ventures in May invested in Yard Club Inc., a San Francisco-based startup that lets contractors rent idle equipment to each other. “When the efficiency of machines go up–if owners can rent machines to their partners–our sales of machines go down,” said Caterpillar Ventures General Manager Michael Young. “If we don’t do it, someone else will.”

UPS, meanwhile, set up a 3-D print farm in the middle of its largest air hub to replicate critical parts for customers who need them fast. “We’ve got the service line at the end of the runway–we’re trying to participate in whatever the supply chain shift is,” said Rimas Kapeskas, managing director of UPS Strategic Enterprise Fund. “The future is hard to predict, but easier to create.”

5. When it comes to investing in new technology, corporate venture arms need to keep pushing against the naysayers inside their own companies, said several people at the conference.

“You can try to create the best, most rational data-based presentation, but ultimately you find that human beings need to make decisions,” Mr. Kapeskas said. “You need to find the right people in the company and take them out in the world. …They need to viscerally see and experience some of this stuff. That’s what changes minds.”