Case Examples - Motorola

Creating Strategic Value for Motorola

Motorola Ventures (MV) is the strategic venture capital arm of the global communications and embedded electronics company. MV actively invests in early-stage companies with high growth potential in areas of strategic interest to Motorola's current and future businesses. Wireless LAN, broadband, smart cards, telematics, and next-generation silicon applications are a few of the technologies within MV's investment scope. Typical investment size varies from $1 million to $10 million per investment. The company maintains operations in Boston, Chicago, and Palo Alto.

This foray into corporate venturing, which began in 1998, wasn't the first for Motorola. In fact, the previous attempt was an arguable failure, mainly because the relevance of the investments strayed too far from the core business. Jim O'Connor, a managing director at MV, explains that today, strategic value is the key-both value to Motorola and value from Motorola. Without the ability for value to be added in both directions, an investment doesn't make sense.

Take, for example, Motorola's equity investment in Graviton, a provider of wireless sensory information networks. Graviton appeared to be an extremely attractive financial investment given blue chip venture investors such as Kleiner Perkins in prior rounds. However, it was the potential strategic value from a co-development arrangement that drove the investment decision. The complementary nature and potential from combining Graviton's offerings with Motorola technology made the decision easy.

O'Connor stresses the importance of the noncash contributions that corporate venture groups make to new ventures. He also acknowledges that the private venture capital community, perhaps deservedly so, often knocks their corporate cousins in this same area.

But MV takes a unique approach with its investments after it funds them. The venture group is divided by function in three ways: business developers (deal sourcing), finance (terms and conditions), and venture managers. This last group is special. They dedicate the majority of their time to helping portfolio companies navigate the corporate hierarchies to ensure that they get the right attention. In fact, MV uses a three-champion approach to managing portfolio companies. One champion is the venture manager, the second champion is a senior business manager from the unit that sponsors the venture, and the third champion is the senior technology manager. In other words, they invest most of their time with a portfolio company after they finance it, not before, helping them with the operational issues of growing a new business and helping them navigate the complexities of large corporate partner.

To ensure that strategic value is being captured, the MV team measures it at very granular levels of detail. In keeping with the company's Six Sigma approach, MV methodically tracks incremental as well as long-term strategic measures, calibrating direct and indirect impacts on revenue creation and cost reductions-in addition to the market value of the ventures themselves.