As every company becomes a tech company, we see large organizations experimenting with different techniques to inject some innovation into their legacy businesses. Some open “innovation centers” in the Bay Area. Some acquire smaller tech companies and turn them into their “labs” division. And some have even gone so far as to set up corporate venture capital arms, attempting to make investments into early-stage tech companies with hopes of getting a front row seat to the potential disruptors of the future.
These are all worthy ideas that can result in varying degrees of effectiveness. But many of them come with a bunch of challenges:
- Relegating “innovation” to one corner of your company is the same as telling your company that innovating is not part of everyone’s job. Instead, successful innovators push decision-making down, encourage and reward disruptive ideas no matter where they come from within, and remind employees that one’s position in the market is always tenuous —disruption is likely just around the corner.
- The best talent tends to be attracted to places where there is a high likelihood of shipping a product. Working in a “lab” can be fun, but after 18–24 months of working on something, if it isn’t going to ship, most great folks will flee to someplace else. It’s too hard to build critical experiences around what works in a market if you only dream up prototypes in a lab. And good product people can only turn into great product people by shipping -> learning -> iterating -> shipping -> repeat.
- Entrepreneurs and boards are mixed on the benefit of taking investment from strategics. For an early stage company, more often than not I see boards decline investment from strategics. This is true for a few reasons: strategics tend to overpromise and under deliver on how much they can really alter the trajectory of a startup; strategic’s objectives tend to be different (learn, get data) from that of the founders and VCs (build a big, successful company); and having a strategic involved can remove the possibility of working with other strategics in the same space at a later date. The calculation is often different for later-stage startups who have established market success. In those cases, I have seen strategic investment (and business acceleration) occur more frequently and more successfully.
I believe, however, all of these approaches undervalue one of the greatest assets large, successful enterprises have that many young startups want — data.
Many of the most exciting companies we see these days, in both consumer and enterprise segments, utilize machine learning in some capacity. No matter how good your algorithms, however, a pre-requisite for successful training of computer models is often large, somewhat clean, datasets.
For non-tech companies, an alternate and possibly more valuable way to attract attention in Silicon Valley is to open up shop and advertise access to your data. Companies in every industry from financial services to consumer goods, for example, have access to troves of data on which to train. A partnership model whereby a strategic makes large volumes of data available to a startup and, in return, the startup can share the resulting trained application with the strategic to improve business decisions are win-win.
At Venrock, we have been exploring this model as a go-to-market approach for many years. Castlight Health, for example, came to market this way, partnering with self-insured large enterprises, getting access to their claim data and, in return, providing transparency into healthcare pricing.
If you are a big enterprise with very large and interesting data sets, let us help connect you with superstar machine learning entrepreneurs excited to work with you.
To Get Cozy with Silicon Valley, Your Data Is More Valuable Than Your Cash was originally published in pakman.com on Medium, where people are continuing the conversation by highlighting and responding to this story.