Interview with Linda Yates - Founder of Mach49 and Author of 'The Unicorn Within'

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.

In today’s newsletter I’ve sat down with Linda Yates , CEO and founder of Mach49 , a trailblazing firm that partners with global businesses to build their growth engines through venture building, venture investing, strategic partnering, and targeted M&A. Linda is also the author of the book “The Unicorn Within” - How companies can create game-changing ventures at startup speed.?????????????

Introduction to Linda Yates

Linda Yates, a seasoned CEO with 25+ years of global strategy and innovation experience, bridges Silicon Valley and the Global 1000. She founded Mach49, the unique Silicon Valley incubator/accelerator focused on Disrupting InsideOut and OutsideIn for G1000 firms. As a former NYSE-traded Sybase Inc. board member and Strategos CEO (co-founded with Gary Hamel), Linda brings extensive global insight. She's also an Aspen Institute Henry Crown Fellow, an environmental activist, and an education pioneer, with degrees from the University of Virginia and Stanford University

With your extensive global experience, what trends or patterns have you seen in the past 24 months within CVC.

There are three key areas that come to mind:

1.?????? New Professionalism Over the past several years, we have designed and advised on the deployment of $4 billion in CVC AUM, representing numerous global corporations as they venture into the startup space. We've witnessed the industry grow increasingly competitive, with the best corporate funds adopting the same high standards and processes as top-tier Silicon Valley VCs, although there remains a wide spectrum of quality. This shift has triggered a ripple effect in fund operations, including greater reliance on incentive-based compensation and carry structures, increased autonomy in investment decisions, and consequently, a surge in top-tier talent seeking CVC roles.

2.?????? Focus on Operational Efficiency in Growth Corporations are placing a growing emphasis on efficiency across their growth initiatives, compelling CVC units to collaborate more closely with other functions such as corporate development and venture building. This collaborative approach allows them to construct authentic growth engines, adopting an integrated strategy that encompasses building, buying, partnering, and investing, rather than operating in isolated silos.

3.?????? Demonstrated Staying Power In contrast to previous economic cycles, CVCs are not retreating from the venture market amidst recent economic uncertainties.

"CVCs aren’t fleeing the venture market in the face of recent economic uncertainty"

Instead, many corporations are leveraging their robust balance sheets to seize opportunistic deals arising from the broader VC market's contraction. They are intensifying their commitment to venture opportunities, leveraging their unique assets to provide startups with distinctive capabilities, essential for navigating the path to scale.

?

From an operating role where do you see most Corporates having a challenge?

We've had the privilege of collaborating with over 30 Fortune 500 companies to develop their growth engines, and the primary challenge we've consistently observed is related to governance. Fostering growth necessitates managing a portfolio of complementary initiatives—each inherently high-risk and high-reward—guided by clearly defined stage gates that determine whether a project proceeds or is discontinued. This approach stands in stark contrast to the traditional annual corporate budget cycles. Executives must shift their perspective to evaluate early success akin to venture capitalists. This involves assessing customer proof points, pilot outcomes, and long-term potential, rather than immediate profitability. It requires embracing a portfolio mindset, as opposed to relying exclusively on a single high-stakes venture.

?

Moreover, the financial markets and investment analysts also bear a significant responsibility for the challenges faced by large corporations. They must recognize and reward these companies for fostering growth through ventures in areas like venture building and venture investing. The financial markets already possess the metrics and valuation methods, such as assessing customer acquisition growth and revenue growth, which they consistently apply to startups approaching the public market. It is imperative that they extend these metrics to evaluate the ventures initiated by Fortune 1000 companies. This evaluation should not follow the same criteria as their core or legacy businesses, and certainly not on a quarterly basis. Large company ventures deserve even greater valuation recognition than their startup counterparts, primarily because they often possess vast customer bases to which their new ventures can immediately market their offerings.

?

Where would you recommend corporates to start on their Venture journey?

A robust growth engine begins with a profound understanding of customer pain points, followed by a willingness to undertake experiments and initiatives aimed at addressing those pain points. To kickstart this process, organizations should select an area marked by strategic or technological uncertainty, such as climate or robotics, and conduct a domain exploration to gain insights into the landscape. Alternatively, they can conduct a series of customer or stakeholder interviews to unearth the root causes of their challenges within that domain. Companies must then define the strategic shift they aim to achieve—from their current state to their desired future state.

"A great growth engine starts with a keen understanding of customer pain"

With this clarity, they can construct an initial portfolio of initiatives, spanning from venture building and strategic partnerships to venture investing and acquisitions. The pivotal step is execution—making calculated, small-scale investments that focus on mitigating the most significant risks while conserving capital. Engaging an external advisory partner can prove invaluable in helping corporate teams develop the necessary skills for successful execution. However, it is crucial for these growth capabilities to become internal assets that yield long-term benefits. Outsourcing your Corporate Venture Capital (CVC) activities to an external entity that merely invests on your behalf will provide limited learning and fail to establish the lasting growth capabilities required for decades of success.

?

From your own experience, where have you seen the most benefit of corporate venturing in hindsight.

In hindsight, Corporate Venture Capital has proven immensely valuable in demonstrating the benefits of active engagement in emerging technologies and markets, as opposed to passive observation. The insights gained from executives actively involving themselves with new technologies and startups have resulted in the development of pioneering products and services, as well as the refinement of corporate strategies. This proactive approach provides a significant advantage over competitors who opt for a 'wait and see' approach, waiting until clear winners emerge. For the Global 1000, staying abreast of the 'Art of the Possible' is essential, and CVCs serve as an excellent means to achieve this.

?

In your book where have Corporates found the most interest?

The book has enjoyed remarkable success, earning accolades such as being named a Top Ten Business Book of 2022 by Forbes and One of Seven Startup Books Every Entrepreneur Should Read by Malcolm Gladwell and Dan Pink. Additionally, we are thrilled to share that it has earned a place on Harvard Business Review Press's All-Time Impact List. This achievement is a testament to the hunger among executives and managers for a practical guide on achieving growth through venture building and venture investing. What particularly resonates with them is the book's focus on building capabilities rather than fostering dependency. It presents a teachable, repeatable, and scalable process for driving growth, allowing them to test and explore new ideas.

"Corporations have been particularly compelled by the idea that the book is there to help build capability not dependency"

The book's core message—that customer insights are the cornerstone of credibility, while everything else amounts to uninformed opinion—resonates deeply. Executives understand that their teams must invest real time with customers to truly understand and validate their pain points. They appreciate the emphasis on execution, as they seek actionable strategies rather than just PowerPoint slides. Importantly, they value knowing that these actions are designed to mitigate risks effectively. Every exceptional executive aims to have their team engage with customers proactively, with a clear framework for turning feedback into business opportunities and growth. 'The Unicorn Within' serves as a playbook that aligns with these aspirations

Conclusion

I've had the opportunity to collaborate with Linda, her husband Paul Holland, and some of their colleagues at Mach49. Their insight into Corporate Venturing is impressive, and I've become a fan of their model. If you're a Global Top 1000 company looking to embark on your venture journey, a conversation with them is a must. Linda, Paul, and Team Mach49 will be participating in the Innovation Roundtable? Summit in Copenhagen in November 2023.

While you're at it, remember to mark your calendars for the Global Corporate Venturing Summit in Monterey, California in March 2024, where Mach49 also hosts a variety of educational sessions and events.

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