John Freer says he gets to see “some pretty cool stuff” as a member of General Electric Co.’s venture capital team.
The Rensselaer Polytechnic Institute alum, who trained as an electrical engineer, has the title of manager of external technology initiatives at GE Global Research, where he’s responsible for the “technology diligence” done on target investments in the clean-tech and energy sectors.
GE as a VC?
While it may seem far-fetched that the multinational giant would be interested in bankrolling a widget being developed in someone’s garage, a report released last fall indicates that many big names in Corporate America are active venture capitalists.
Such investing can be risky “but considering all the disruptive potential of the innovations emerging from startups, the greater risk is not to invest at all,” says Alexander Roos, a partner in The Boston Consulting Group and co-author of its report on corporate venture capital.
More than 750 corporations worldwide now have venture arms or hold venture investments, according to the report, with many of them seeing the investments as bolstering in-house research and development efforts.
Companies have cycled in and out of corporate investing at three distinct points over the past 50 years, the report says. The wave typically begins when companies are flush due to some key event, but then ebbs as the economy sours. One cycle, for instance, encompassed the Internet-fueled, dot-com run-up in the mid-1990s that went bust a few years later.
This time is different, though, the report says. That’s because the latest push is characterized more by the creation of networks of companies in complementary fields “that promise to bring disruptive change to a broad span of industries.” The report calls GE “the most active participant in cross-industry networks” because of investments made with partners in unrelated businesses. The company joined with Google, for example, on a biofuels investment and with Intel on a smart-grid outlay.
GE formally christened its efforts GE Ventures earlier this year, centralizing investing that may have been done in the past by various business units into one office. GE plans to allocate $150 million a year for investments, said company spokeswoman Leigh Farris. The focus will be on software, health care, energy and advanced manufacturing.
Freer talked about GE’s corporate VC role as the guest speaker at the Entrepreneurs’ Breakfast Group, a forum sponsored by RPI. He characterized corporate investing as being “a little more focused on the numbers” than traditional venture capital.
The “elements of a compelling funding story” — a potential investment — are these, he said: 50 percent is about a strong leader who can attract a good team; 25 percent is about the market and whether it is growing; and 25 percent is about the technology and whether it is better and cheaper than anything else around.
Freer’s team evaluates hundreds of investment pitches a year; GE usually becomes a minority investor, rather than taking a more active role through a board seat. The goal is to see three to five times the initial investment in three to five years.
And while he looks to make investments in bleeding-edge technology, Freer said he knows he has to balance that with the prospect of its integration into conservative GE.
“Keep your IP [intellectual property],” he said. “We need to know the what, and why it’s relevant.”
Marlene Kennedy is a freelance columnist. Opinions expressed in her column are her own and not necessarily the newspaper’s. Reach her at firstname.lastname@example.org.