#46: The Game-Changing Venture Client Model - An Exclusive with Gregor Gimmy, the Mastermind Behind this Novel Approach to Corporate Venturing

Hi, I'm Jeppe and welcome to my weekly newsletter on Corporate Venturing, released every week. My aim is to provide a comprehensive perspective on the latest developments in the field and its related topics, drawing from the insights of top management, venture capitalists, founders, LPs, and family offices. I aim to offer valuable information and thought-provoking content that will aid in understanding the importance of Corporate Venturing in business strategy.

Today, I am excited to share insights from my recent interview with Gregor Gimmy , founder and CEO of 27pilots , acquired by?Deloitte in 2023. Gregor is the author of "Buy, Don’t Invest: The Venture Client Model: A Paradigm Shift in Corporate Venturing," a book that explores the groundbreaking method he initiated at BMW. This method, validated by its success at BMW, laid the foundation for creating 27pilots, a pioneering Venture Client Solutions provider. It is transforming the way corporations leverage startups for strategic gains, marking a significant evolution in corporate venturing. He's also a guest lecturer at INSEAD, where he shares his insights and experiences. His scholarly work on the model was featured in the Harvard Business Review in July 2017, marking a significant contribution to corporate venturing literature.

A Trailblazer's Journey

Gregor's story is a testament to the power of innovation and strategic thinking. His career began at Roland Berger as a strategy consultant. IDEO in Palo Alto, the “capital” of Silicon Valley, where he played a pivotal role in evolving the company into a strategic innovation consultancy, contributing to the development of Design Thinking. From there, Gregor ventured into the world of startups in Silicon Valley and Europe, harnessing his entrepreneurial skills backed by venture capital. In 2012, Gregor took a pivotal role at BMW's headquarters in Munich, initially spearheading a new innovation strategy team. By 2015, he had established the world’s first Venture Client Unit, the BMW Startup Garage, marking a significant milestone in corporate venturing. In 2018, leveraging his experience and insights, Gregor launched 27pilots, becoming the world’s premiere provider of Venture Client Solutions. His mission was clear: to assist companies in developing and managing top-tier Venture Client Units. 27pilots swiftly garnered a robust customer base, including industry giants like Airbus, BMW, Bosch, Holcim, and Siemens, spanning over 10 sectors. By 2023, 27pilots had made such an impact that it was acquired by Deloitte. Currently, Gregor leads 27pilots as its CEO and serves as a Partner at Deloitte, where he is dedicated to advancing the global Venture Client Solutions offering.

Pioneering the Venture Client Model at BMW

Gregor Gimmy's tenure at BMW stands as a landmark period in his career and in the broader landscape of corporate innovation. His work at BMW was driven by a pivotal question facing large corporations: How can they efficiently and effectively leverage the groundbreaking innovations offered by startups, at scale and across the entire value chain, without the ?????risks and complexities associated with traditional corporate venture capital? In essence, the question is how a corporation can harness the power of hundreds of leading-edge startup technologies across its entire value chain to enhance products, processes, and business models. This spans from R&D to manufacturing, logistics, sales, marketing, and even HR, on an annual basis.

Identifying the Shortcomings of Traditional CVC Models

At BMW, Gregor observed firsthand the inherent challenges in the conventional CVC approach. One ?????major challenge is the inherent limitations of minority investments in capturing strategic benefits from startups. Firstly, Corporate Venture Capital (CVC) investments are not scalable. On average, CVCs invest in only 3-10 startups annually, yet the number of startups with strategic relevance is substantially higher. Furthermore, not all startups are open to having corporations on their cap table, and the more promising the startup, the more challenging it becomes to secure an investment. Such investments are also highly capital-intensive and fraught with risk. Importantly, merely holding shares in a startup does not yield strategic value; the corporation must effectively apply the startup's technology to solve a relevant problem. According to CB Insights, only about 10% of startups in CVC portfolios establish a strategic relationship with the investing corporation.

The Genesis of the Venture Client Model

Addressing the limitations of Corporate Venture Capital (CVC), Gregor adopted a groundbreaking approach. Rather than attempting to refine CVC practices, he introduced an innovative concept to corporate venturing, which he named the Venture Client Model. Driven by his belief that CVC inherently falls short in achieving strategic objectives on a large scale throughout the entire value chain, he developed and put into practice the Venture Client model. This led to the establishment and management of the world’s first dedicated Venture Client Unit at the BMW Startup Garage. This model represented a paradigm shift in how corporations engage with startups. Instead of taking equity stakes, the Venture Client model positioned BMW as a client of startups. This shift allowed BMW to focus on acquiring and utilizing the startups' technologies and solutions directly, bypassing the intricacies and risks associated with equity-based investments.

Strategic Alignment and Risk Mitigation

The Venture Client Model facilitated a more strategic alignment between BMW’s business objectives and the innovations from startups. By acting as an early adopter client, BMW w???? ould pinpoint specific technological needs and seek out startups that offered unique solutions directly aligned with these requirements. This approach not only streamlined the integration of new technologies into BMW's existing systems and processes but also ensured that each startup technology would?directly contribute to the company's strategic goals.

Moreover, this model significantly mitigates?risks. By not taking equity positions in startups, BMW sidestepped the financial and regulatory complexities of traditional CVC models. This reduction in risk allowed for a more agile and responsive approach to innovation, enabling BMW to test and deploy new technologies more rapidly and efficiently.

A Vanguard in Corporate-Startup Synergy

After his groundbreaking work at BMW, Gregor Gimmy embarked on a new venture, founding 27pilots?in June 2018. This venture stemmed from his visionary approach to corporate venturing, with a mission to transform how companies worldwide engage with startups.

Tailoring the Venture Client Model for Diverse Industries

At 27pilots, Gregor and his team specialize in building world-class?Venture Client Units?for a myriad of industries. Recognizing that each sector and company has unique challenges and innovation needs, 27pilots?works closely with corporate clients to understand their specific requirements. This bespoke approach ensures that the Venture Client Units they help establish are perfectly aligned with each company's strategic goals, operational frameworks, and cultural nuances.

Expanding Corporate Innovation Capabilities

A key focus at 27pilots?is to not only create but also significantly enhance and expand ?????internal Venture Client Units of corporations. Gregor's team assists companies in scaling up their venture clienting??capabilities, enabling them to more effectively and efficiently integrate startup technologies. This involves developing robust processes for identifying, evaluating, and adopting???? startup?solutions that address?the most burning?strategic challenges???? .

Streamlining Startup Engagement

Under Gregor's visionary guidance, 27pilots has led the way in delivering services, technologies, and data that empower corporations to excel in Venture Client operations. The offerings of 27pilots are tailored to forge outstanding Venture Client strategies, processes, organizational frameworks, and resources. Additionally, 27pilots has innovated proprietary software tools designed for Venture Client units. These tools enhance the management of Venture Client projects and enable the assessment of the strategic impact of startups. Another cornerstone of the 27pilots offering is Venture Client Data. Essential for the operation of Venture Client Units, this data encompasses insights on corporations and startups

Driving a Culture Shift in Corporate Venturing

Gregor’s work with 27pilots?is?also playing?a pivotal role in driving a cultural shift within client organizations. By demonstrating the effectiveness of the Venture Client Model, 27pilots is helping corporations to adopt a more open-minded approach towards the startup ecosystem. This shift is crucial in fostering an environment that is conducive to embracing external innovations from startups and collaborating more seamlessly with the startup ecosystem.

The Venture Client Model: Redefining Corporate-Startup Dynamics

During our enlightening discussion, Gregor Gimmy shed light on the transformative nature of the Venture Client model, a concept he pioneered and perfected since 2014 throughout?his?work first at BMW, and since 2018, at dozens of corporations through 27pilots. This model stands in stark contrast to the traditional, equity-based corporate venture capital (CVC) methods, offering a fresh, strategically focused approach to corporate innovation.

Efficiency and Strategic Alignment

The cornerstone of the Venture Client model is its efficiency in bridging the gap between large corporations and top???? ?startups. Unlike conventional CVC practices that often involve lengthy due diligence and complex equity stake negotiations, the Venture Client model enables corporations to swiftly access and deploy innovative solutions from startups.

The swifter your knowledge and implementation of new technologies, the greater your competitive edge

This streamlined process is not just about reducing time-to-market for new technologies but also ensuring that these innovations align perfectly with the corporation's strategic needs and goals.

Direct Utilization Over Equity Investments

A pivotal aspect of the Venture Client model is the direct utilization of startup???? ?innovations without acquiring equity stakes. This approach allows corporations to bypass the intricacies, legal entanglements, and financial risks typically associated with equity investments. By focusing on purchasing solutions and not shares, corporations can rapidly integrate cutting-edge technologies and solutions into their operations, enhancing their competitive edge in the market.

Prioritizing Rapid Integration and Strategic Fit

In the Venture Client model, the emphasis is placed on the strategic fit and rapid integration of startup innovations into the corporation's existing processes and product lines. This focus is crucial for corporations looking to stay agile and responsive in fast-moving markets. By swiftly adopting and integrating these technologies, corporations can keep pace with, or even stay ahead of, evolving industry trends and customer demands.

Mitigating Risks and Streamlining Processes

Another significant advantage of this model is the mitigation of risks associated with traditional venture investments. Corporations can engage with startups and their technologies without the obligation of long-term financial commitments or the complexities of managing equity relationships. This risk reduction is especially appealing to corporations that are keen to innovate but cautious about the potential downsides of conventional venture capital ventures.

Encouraging Collaboration and Innovation

Gregor also emphasized how the Venture Client model encourages a more collaborative and innovation-friendly environment within corporations. By directly working with startups, corporations not only gain access to new technologies but also imbibe the startup culture of agility, flexibility, and out-of-the-box thinking. Corporate citizens also get to know startups teams in person. They directly experience their deep expertise and passion for solving corporate problems through their inventions. This cultural infusion is vital for traditional corporations looking to foster a more innovative and dynamic workplace, and it mitigates prejudices that often stand in the way of mutual win-win relationships.????

Looking Ahead: Redefining the Corporate-Startup Ecosystem

In our insightful conversation, Gregor Gimmy not only shared his experiences but also cast a visionary eye on the future of corporate venturing. His perspectives offer a roadmap for evolving and enhancing the interactions between corporations, startups, and venture capitalists.

Win-Win-Win: Harmonizing Relationships Among Startup Ecosystem Stakeholders

In the startup ecosystem, a symbiotic relationship exists among startups, venture capital, and venture clients, creating a scenario where every participant benefits without any conflict of interest. Startups are dedicated to addressing the unfulfilled demands of their venture clients, tailoring their innovations to meet these specific needs. Venture capitalists, on the other hand, are drawn to invest in these startups because their distinctive solutions promise higher-than-average financial returns. Meanwhile, venture clients rely on these innovative solutions from startups to tackle complex challenges more effectively than traditional methods, thereby enhancing their competitive edge. This interconnected dynamic ensures that startups, investors, and corporate clients all share in the success, fostering a cooperative and productive ecosystem.

Clear Communication: The Key to Synergy

A fundamental aspect of Gregor’s vision is the importance of clear communication from corporations regarding their technological needs and strategic objectives. This transparency is crucial in guiding venture capitalists and startups towards more targeted and relevant innovations. By articulating their challenges and requirements effectively, corporations can steer the startup ecosystem to develop solutions that are not just innovative but also directly applicable to their immediate and strategic needs.

A More Efficient Ecosystem

This approach promises to streamline the innovation pipeline, reducing the time and resources spent on exploring and testing technologies that may not align with corporate goals. For venture capitalists, this clarity offers a clearer investment thesis, allowing them to fund startups whose products and services have a defined market, thereby reducing risk and increasing the potential for success. For startups, it means a more direct path to relevant markets and potential customers, ensuring that their innovations find practical applications and real-world impact.

Partnerships Beyond Transactions

Looking forward, Gregor envisions a future where the relationship between corporations and startups transcends transactional interactions. He advocates for partnerships that are rooted in a deep understanding of mutual goals and challenges. These partnerships would be characterized by a shared commitment to innovation, where corporations and startups collaborate as equal partners, each bringing their unique strengths to the table.

Mutually Beneficial Collaborations

In this future ecosystem, startups benefit from the scale, experience, and resources of large corporations, while corporations gain access to the agility, creativity, and cutting-edge technologies of startups. This symbiotic relationship fosters an environment where both parties can grow and innovate together, creating a dynamic that is far more productive than traditional corporate-startup engagements.

Conclusion - My Takeaway: Shaping Corporate Innovation

From my enlightening discussion with Gregor, it's clear that corporate leaders must embrace models like the Venture Client Model and effective CVC usage, drawing on real-world insights from seasoned practitioners. This learning goes beyond traditional academic frameworks, encouraging a shift in corporate culture towards agility and strategic open-mindedness. It's vital for leaders to recognize the long-term strategic value of startup technologies???? , extending beyond potential???? ?financial returns to focus on driving???? ?sustained innovation and growth. My conversation with Gregor reaffirmed the importance of equipping leaders with the knowledge and tools to forge successful, mutually advantageous relationships with startups, steering corporations towards a future of innovative and collaborative success.

I hope you enjoyed this week's newsletter. If you have any suggestions or contributions that you would like to share with me, please do not hesitate to reach out. I would be delighted to hear from you.

/Jeppe