Guest lecture at the Amsterdam Business School (University of Amsterdam) on corporate venture capital by Herman Kienhuis (March 2019)

1. Corporate Venture Capital
Herman Kienhuis, March 18 2019, Amsterdam
MBA Programme in Business Administration
Corporate Venturing Business Lab

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

3. Introduction

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

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

6. The Venture Capital (VC) Industry

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

8. Development of VC financing in the US
Source: NVCA Venture Monitor

9. Development of VC financing in Europe
Source: Dealroom.co

10. Venture capital funding per country

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

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

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

14. 3. Portfolio Management
Q1 Q2 Q3 Q4
Shareholder
governance
Control rights
Protective rights
Information rights
Board governance
Advisory
• Strategy
• Organization
Oversight
• Finance
• Hire & fire
• Risks
support management with strategic and operational advise, recruiting
support, sales intro’s, investor intro’s, personal coaching, etc.
Quarterly board meetings
and interim board calls
o Approve annual accounts, discharge executive directors
o decide on new share issues, appointing directors, strategic
shifts / major investments
General and Extraordinary Shareholder
Meeting(s)

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

16. 4. Exit
US VC-backed companies Major Dutch ‘Exits’
IPO’s Acquisitions

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

18. Corporate Venture Capital (CVC)

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

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

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

22. Development of Corporate Venture Capital
2018: 773 active corporate venture capital units,
investing $53B in 2740 deals,
Participating in 23% of all VC transactions
Source: CBInsights CVC report 2018

23. Most active CVC’s globally
Source: CBInsights CVC report 2018

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

25. Dutch Corporate Venture Capital Units
AEX:
1. Shell Technology Ventures
2. Unilever Ventures
3. ASML
4. ING Ventures
5. Philips Health Technology Ventures
6. Ahold Delhaize
7. Unibail
8. Heineken
9. AkzoNobel
10. RELX
11. Wolters Kluwer
12. Arcelor Mittal
13. DSM Ventures
14. NN
15. Aegon/TransAmerica Ventures
16. ABNAMRO Digital Impact Fund
17. KPN Ventures
18. ASR
19. Randstad Innovation Fund
20. Gemalto
21. Galapagos
22. Aalberts
23. Vopak
24. Signify
25. Altice
Others:
• Rabo Frontier Ventures
• Eneco Ventures
• Alliander Corporate Venturing
• Nutreco NuFrontiers
• NS Innovatiefonds
• RTL Ventures
• SanomaVentures
• Liberty Global Ventures
• Merck Ventures
9 out of 25 AEX corporates have a corporate
venture capital unit, with a 10th starting

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

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

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

29. CVC Case Studies

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

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

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

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

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

35. Q&A

36. Related resources

37. Thanks

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