• international
  • VC
June 23, 2010

Cross-Border Venture Revolution: Next Generation Startup Agronomy

Cross-Border Venture Revolution: Next Generation Startup Agronomy

Michael Madison, Class 12 and Koichiro Nakamura, Class 12

Just as energy is the basis of life itself, and ideas the source of innovation, so is innovation the vital spark of all human change, improvement and progress.
–Ted Levitt, late Harvard Business School professor and economist1

With an ocean’s distance between them, Cocoon Ventures (Mountain View, CA) and Mitsubishi Corporation’s Innovation Kitchen (Tokyo, Japan) formed an alliance that functioned as a single venture family unified by operational purpose. We fixed our focus on cross-border collaborative investing between the United States and Japan, likening ourselves to venture agronomists, rather than traditional venture farmers working the fertile regions of Silicon Valley and Boston. We were inspired by Norman Borlaug, the Nobel laureate agronomist who single-handedly increased worldwide grain production more than 2.5 times by thinking more like a mad-scientist than a farmer. Borlaug’s work is estimated to have saved more than 1 billion lives and fueled what is now known as the Green Revolution—our efforts are aimed at fueling a Venture Revolution. Just as Norman viewed adequate food supply as the fundamental element of social justice, we view adequate venture supply as the basis for global economic stability, stimulation, and equality.

The story of the Green Revolution serves as a parable for innovation within the venture industry. In 1943, Mexico imported more than half of its grain for two reasons: endemic strains of wheat did not thrive in Mexican soil, and traditional fertilizers caused the wheat to grow tall but too top-heavy for the supporting root system, so that wind knocked it over. As a result, wheat crops would die in droves and importing wheat was necessary to feed the people. Borlaug sought to fix the problem by leveraging Mexican government support and implementing extreme agronomic techniques. First, he located and evaluated foreign wheat seeds for use in Mexico, eventually identifying the perfect candidate: a certain strain of Japanese wheat was very short and would grow deep, strong roots. However, this wheat was unsuitable for Mexican soil. Undaunted, Norman’s second step was to genetically alter the Japanese wheat seeds for growth in Mexico—mad science indeed. He did not stop there. After producing a variant that would flourish, he altered it again to double the yield per stalk. Last, Borlaug instituted an educational platform to support the needed behavior and process changes in the farming community; although he had created “magic” seed, proliferation of his techniques would not have been possible without this last step.

Together, Cocoon Ventures and Innovation Kitchen have been emulating Norman’s Green Revolution for venture capital, leveraging our experiences to launch a global platform for venture collaboration and innovation. Like Norman, we sourced foreign venture seeds for planting in traditionally less entrepreneurial ecosystems. We genetically altered and tested new venture models and seed structures to influence high venture growth and sustainability. Venture education infrastructure is also at the core of our global platform, which we call the World TaSCforce.2 In this article, we describe this World TaSCforce platform for cross-border collaborative venture investing. We begin by forecasting the future of venture capital, because this future drives the need for such a platform. Next, we recount real case studies that lead us to form the World TaSCforce, and conclude with a platform description.

Future Perspective

Some scholars argue that venture capital’s roots go back to when the pilgrims ventured to the new world;3 however, most agree that venture capital was born in the United States right after World War II through the efforts of Georges Doriot. Yet, although the world has changed quite a bit since 1946, major innovation in the venture capital industry has not happened—largely because until now, it has not been necessary. However, our current global economic crisis is driving cross-border venture collaboration like never before. The active globalization of venture capital collaboration is changing the future.

Tomorrow’s governments will find peace and industrial growth through venture collaboration. Collaborative innovation will be the language of choice for world economic policy and diplomacy. But the source of this innovation will not be the familiar large corporations, R&D laboratories, or current notions of entrepreneurial pedigree. Future disruptive technology will be born from the genius of a young entrepreneur with no official affiliations—a first-time entrepreneur working tediously in the comfort of his or her dorm or apartment. This newbie entrepreneur will live well beyond the fertile borders of startup epicenters like the Silicon Valley and Boston, and beyond today’s current venture capital reach extending to India and China.

Tomorrow’s Silicon Valley is not a geographic location, but rather a mindset and ecosystem that began in Silicon Valley and is spreading to the rest of world via venture education and cross-border venture collaboration. In the future, the power of Silicon Valley will not be in its ability to draw the best entrepreneurial seeds to be planted in its own fertile ground and sprinkled with capital support fertilizer; instead, the power of Silicon Valley will be in the lessons that can be adapted and exported across borders.

Tomorrow’s venture capitalists will no longer be farmers but rather mad-scientists and agronomists who, like Norman Borlaug, are capable of genetically altering seeds that can grow anywhere—irrespective of regional terroir fertility.

The Environment: Examining the Soil

Germination success and failure can be known by the measured growth and fruit borne; the properties of the soil are very important since the soil is the medium for this entire process. For entrepreneurs, it is often easier to alter the seed than the soil, but understanding the soil provides the context for how the seed must change. For example, being an entrepreneur in Japan is not for the faint of heart—it is far from easy.

Japanese Soil

First, in Japan, one’s personal status is almost entirely determined by one’s attachment to a large corporation as well as one’s position within that organization. On the surface, this is also true in the United States; indeed, parents universally brag about the swanky office gigs their matriculating children land, and business school friends naturally “oooh” and “aaahh” when fellow alums land jobs at McKinsey, Kleiner Perkins, JP Morgan, or Microsoft.4 Socially, where you work matters, even in the United States; however, in Japan the situation is quite different. We asked every Japanese entrepreneur we could find: “Where do you tell your parents you work?” And every single one of them admitted they lied to their parents: “Of course, I tell them I still work at [insert big company here].” In the United States, it is often quite the opposite—gainfully employed and unemployed people alike often exaggerate about just how “full-time” an entrepreneur they really are. There is a certain “sexiness” associated with entrepreneurship, and simultaneously, a certain tedium associated with being a part of “the big machine” or plugged into The Matrix.

The Japanese “soil” affects every stage of the innovation process. At the outset, it is difficult for Japanese entrepreneurs to recruit employees: assumptions about your intelligence or how well you did in college are drawn based on the name of your employer, so even if you are crazy enough to want to be an entrepreneur, imagine how hard it might be to build a team of smart co-founders. Securing a home loan can approach impossible if the name of your employer is not high enough in the food-chain, irrespective of salary. Capital is also difficult to obtain, as there are virtually no seed-stage venture capitalists in Japan. However, passing that hurdle and then managing to build an actual product for which customers have a need (this is what we call “the hard part” in the United States) is no guarantee of success. While U.S. companies are often looking for any available edge, Japanese companies are much more conservative and are typically not open to using a completely new technology.

Despite these significant challenges, the largest hurdle is the general Japanese attitude concerning failure, which is quite different in comparison to Silicon Valley. Failure in Japan can be much more like career and social death; in Silicon Valley, failure is embraced and failing a company is almost an honor badge. Steve Jobs was once fired from Apple, Carly Fiorina was offered the head post at the World Bank the same day she was fired as Hewlett Packard’s CEO, and Jay Leno recently managed to get fired twice from NBC in a short period of time, only to emerge even more valuable. U.S. venture capitalists are often happy to redeploy recently fired CEOs into new startups because failing develops an urgent “hunger” for success.

As this example illustrates, examination and understanding of the particular “soil” available for venture innovation is vital to success in that region or country. “Soil” analysis helps determine the best way to modify the “seed,” but in addition, the World TaSCforce also attempts to alter the soil itself, through government partnerships and perhaps even policy support.

Cross-Border Collaboration Context

In this article, we fuse together the words cross-border and collaboration to fully embody an agronomic view of venture capital. “Cross-border” alone is inadequate, as it might represent a franchise approach to venture where a firm’s brand is a collection of loosely affiliated, autonomous offices in multiple geographies—in this model, collaboration is not necessarily the focus. The relationship between Cocoon Ventures and Innovation Kitchen was consummated for the purpose of cross-border collaboration beyond geographic coverage. Our goal was not to plant a flag by increasing our global office space footprint; we believed much more could be done to take advantage of international technology exposure and the market arbitrage opportunities naturally uncovered through cross-border venture operations.

In a venture capital context, arbitrage means collecting technologies from one area of the world, aggregating them with other innovations, and deploying them in the most convenient geographic market. Focusing first on the United States and Japan, we looked for U.S. seeds that would work well in Japanese soil—and vice-versa. However, our effort began with soil analysis: examining Japanese startups and leveraging a U.S. network and entrepreneurial perspective while concentrating our operations in Tokyo.

A Case Study of Success: Scigineer

Building on Norman Borlaug’s legacy, we began our efforts in a region where growth is difficult. Our plant of choice was early-stage technology startups (with adequate founders), and our target soil was Tokyo, Japan. At the right time, we would come to the United States to find viable seeds for sowing in Japan, but before then, Innovation Kitchen would spend time examining many domestic Japanese seedlings, probing for any sign of growth potential in U.S. soil. After hunting for and considering existing Japanese startups, it was clear the Innovation Kitchen would need to have a hand in building the company from scratch, laying a solid foundation themselves with the proper structure, team, and resources.

And so, a search for great Japanese technology ensued. Enter Scigineer, a recommendation service company built around a serendipitous discovery engine capable of generating recommendations and divining relationships between seemingly unrelated data.

We first discovered Professor Shinichiro Yoshii at Hokkaido University; he was renowned in Japan for his domain expertise around a behavior-based data discovery. After much discussion, we wooed him away from the university, and two top level engineers away from a large corporation—no easy feat given the business and academic culture in Japan. We initially hired them as Mitsubishi Group Company employees; this essentially guaranteed the founder’s business status until the company became more well-known. It also afforded the ability to hire top-level talent in academia and engineers from big companies. Being aligned with Mitsubishi Corporation avoided a number of hardships Japanese entrepreneurs usually face.

Our first task was to resolve any conflict with Hokkaido University, since the underlying technology was at the school; however, much to our surprise Hokkaido University only cared that patent filing costs were covered. So, securing the permission and support from Hokkaido University was as simple as reimbursing the patent filing costs, without any additional license expense.

The next major task was team-building (again, very challenging for a startup in Japan). In the beginning we let Yoshii and other core technologists focus on technology development and prototype-creation. Most other operational functions like legal registration, business model development, hiring, and prototype sales were covered by Innovation Kitchen staff.

After structuring Scigineer, Innovation Kitchen used Mitsubishi Group and the Kauffman Fellows network to do much of the business development. Cocoon Ventures later functioned to fill this role and help Innovation Kitchen identify promising applications for the discovery engine technology: web navigation optimization, a behavioral-targeted advertisement engine, or a recommendation engine with future sights set on “crowd-computing” (a generalized programming interface for generating behavior-based recommendations).

After we refined the product, initial sales inside Japan were set in motion using Mitsubishi’s network; however, Japanese companies are not open to using a completely new technology, so it was very difficult to acquire customers without existing customer validation. Furthermore, even after gaining Japanese customers, they were not comfortable giving product feedback. As a result, we could not rely on customer feedback to improve the product.

Scigineer and Innovation Kitchen again needed to leverage Kauffman Fellows classmates, asking for introductions to prospective customers, and with their help we recruited ten beta customers willing to test our raw product and give feedback. Scigineer reshaped its services based on U.S. beta customer feedback; only then could we return to Japan to again leverage Mitsubishi’s network. This time, customers swarmed and the pipelines filled faster than it was possible to service.

Cross-border execution made it possible to gain local Japanese customers, and the same was also true in securing Japanese investors for subsequent rounds. Until a U.S.-headquartered venture capital firm invested (Doll Capital Management), Japanese venture capitalists and strategic investors were hard to come by.

Scigineer illustrates the potential for native Japanese seeds to flourish in entrepreneurially tough soil, though their success to date was not met without challenges. Overcoming each hurdle required “agronomic experimentation,” with clinical trials seeking to foster conditions advantageous to startup development. Each trial altered critical company structures and involved collaboration with Cocoon Ventures, support from large Japanese corporations (like Mitsubishi Corporation), capital endorsement from a U.S. venture firm (Doll Capital Management), and strategic help from a network of Kauffman Fellows.

With this alignment of resources, Scigineer was able to accomplish much more than many successful venture-backed Silicon Valley startups could within the same time period. For example, within six months, Scigineer had 30 large customers including NTT Group, ANA, CNET Japan, and Recruit, with several becoming strategic investors. Within another six months, Scigineer more than doubled its customer base, adding market leaders like Expedia Japan, Myspace Japan, NTT Docomo, KDDI, and Nissen, with a pipeline exceeding 50 additional customers waiting to use their service.

Such notoriety for a 15-person startup is unheard of in Japan. Scigineer became Japan’s eighth most financially supported venture-backed IT company within two years, earning Red Herring’s Global 100 status as well as CNET’s technology venture award in Japan. Moreover, at the time of this writing, Scigineer and Cocoon Ventures are mid-collaboration on the launching of a U.S. entity.

Scigineer’s case indicates the power of cross-border opportunities and demonstrates how global connectivity begets local strength. This point is also well reflected in the Innovation Kitchen’s project with Cocoon Ventures in bringing U.S. mobile technologies to the Japanese market.

A Case Study of Cross-Border Venturing: Cocoon Ventures and Innovation Kitchen

Cross-border operations between Cocoon Ventures and Innovation Kitchen began by crafting custom collaboration tools to facilitate communication, evaluate deals, and assess global deal partners. These tools were critical given our physical distance and helped identify disparities between managing directors, forcing conversations that drove efficient decisions untaxed by cross-border latencies. Next, we explored investment theses that would best leverage our venture model and yield competitive advantage.

In the end, we settled on a few areas of interest: mobile application middleware technologies, native mobile application conversion technologies, and innovations around personalization-driven serendipitous discovery. Our relationships in Tokyo afforded us the opportunity to be a conduit between U.S. mobile technologies and mobile carriers in Japan—the most advanced mobile market in the world. In addition, personalization and serendipitous discovery technologies seemed far more advanced in Japan as compared to U.S. collaborative filtering startups, and in our opinion the U.S. market would yield greater returns.

Nailing down our investment theses meant that we knew which opportunities and entrepreneurs to target, but we were concerned about the traditional entrepreneurial bias against overseas collaboration. Silicon Valley entrepreneurs are the sun around which orbits an ecosystem of venture capitalists, lawyers, educators, and venture banks. Ordinarily, these entrepreneurs care very little about overseas collaboration; however, amidst the historic economic downturn, we found that entrepreneurs were very interested in globalizing their venture if it meant survival. They were most interested in taking on capital, even foreign capital. Furthermore, all of the U.S. entrepreneurs we encountered were willing to provide a perpetual license to their technology for use in a foreign country in exchange for equity-free capital to help them launch locally.

This realization sparked iteration on several different venture models. We were open to incubation, which meant we did not have to shoehorn sourced deals to fit our theses—if the right opportunity was not available, starting it ourselves and building a team around it was always an option. Coupling this option with the low cost of acquiring technology across borders (relative to traditionally priced equity), we effectively uncovered an arbitrage opportunity. Instead of only seeking traditional venture capital transactions, we augmented our entrepreneur offering to include agronomic licensing or “license-hatching,” joint venture, and venture architecture as well.

License-hatching is a very simple but effective approach for a venture firm open to incubation: a license can be collected in the United States but grown or “hatched” via incubation in Japan. Instead of executing a traditional venture transaction, exchanging equity for cash, we also sought inexpensive perpetual licenses from U.S. startups for exclusive use in Japan. This decoupled seed technologies from startups and founders—with the hope that they could be effectively planted and grown elsewhere with a different team.

Negotiating such a license turned out to be very easy, especially for U.S. startups that had no plans to go overseas within five years; in fact, it was often easier than negotiating a traditional term sheet. For example, one early-stage mobile startup passionately argued valuation, wanting to give up less than 10% of the company for $1.5M invested, yet they were willing to give up 100% of their technology in perpetuity for $300K so long as it was used overseas and required no equity stake in the U.S. entity.

For our cross-border effort, since we were open to incubation with a full incubation team on standby, license-hatching was as good as arbitrage. The process goal was to license great technologies from the United States, build a team the original entrepreneurs would train, and incubate with Japanese engineers and other Japanese corporate partners.

By contrast, a joint venture model enabled us to be on the same side of the table as the entrepreneur and extend their reach by building out their foreign operations earlier in their company lifecycle. An entrepreneur launching NewCo in Mountain View, CA could leverage our structure to simultaneously launch a parallel NewCo Japan (in which the original corporation had an equity stake). This approach not only aligns incentives but reverses the traditional equity tension.

Lastly, we also explored an approach we call venture architecture, a method of building early-stage but large scale platform-oriented ventures. Venture architecture builds on the idea of separating technologies from the originating founders and startups and using them with a different team in a different country. For example, we could “mashup”5 these technologies with other innovations to yield an even stronger platform and venture.

This methodology relies on collaboration to build a “big picture” startup, in itself a small ecosystem. It also involves a great deal of coordination to completely close a deal, as well as a mental shift away from traditional ways of thinking about ventures. Here, the concept of a “deal” shifts away from discrete, self-contained, portfolio companies and toward a collaborative portfolio of technologies, team members, and carefully orchestrated partnerships. In this view, a venture is completely formed after an architected integration of deals come together to form a single solution—a superventure. Entrepreneurs have responded very positively to this approach.

“Mashing up” startups into superventures could occur domestically or cross-border; the cross-border approach takes significantly more time and adds complexity, but also lends itself to corporate partnership and technology integration. This model suggests that venture capitalists should begin as if they are building a wonder of the world, not a temporary structure built to last just five or ten years. Imagine if the builders of the Great Pyramid of Giza, the Taj Mahal, or the Roman Coliseum began with the same philosophy that traditional venture capitalists use to build ventures—they would long since have been forgotten and crumbled to dust. Constructing a masterpiece of a startup may require shedding fear of complexity and embracing the architecture of an entire system, not just a single component. This approach opposes the natural inclination for traditional venture capitalists to negatively weigh the increasing number of “stars” that have to align before there is a clear pathway to success.

Open to these various possibilities, Cocoon Ventures sourced opportunities all over the United States to be launched in the Japanese market in partnership with Mitsubishi Corporation’s Innovation Kitchen. In the course of five months, we whittled thousands of companies down to 398 interesting deals, explored 19 opportunities in detail, and eventually settled on a single plan using all three of these models.

We decided to combine three startups, and successfully negotiated the license of two U.S. mobile technologies to be integrated with the third startup, which is a more traditional deal, ultimately producing a single Japanese startup. This effort is in partnership with a large Japanese IT company that hopes to leverage the integrated mobile platform to launch a newly branded MVNO mobile service. This may all end in spectacular failure—after all, it is certainly complicated and the market is ever-changing as each piece of the overall deal is closed. Only time will tell if the overhead is worthwhile, but the potential and past experience suggest that this approach is the future of venture.

The World TaSCforce

As these case studies demonstrate, cross-border venture collaboration is a source of innovation—relatively untapped, this source may offer a resource in facing the global economic crises. The World TaSCforce is our platform for cross-border venture collaboration, a unified innovation-based diplomacy platform with a twofold mission:

  • global economic development through venture education and collaborative cross-border venture capital; and
  • world-wide technology aggregation and proliferation through entrepreneurial venture formation.

As of this writing, the World TaSCforce has secured support from a number of corporations and government agencies in Japan and the United States, with a soft launch planned by the year’s end and full launch within the next eighteen months.

The World TaSCforce mission is carried out through five core initiatives aimed at growing a government’s innovation ecosystem. This platform is designed for use across the range of developed and developing countries, with synergistic initiatives providing maximum benefit to a country when leveraged in concert but functioning individually as well. Each core initiative is described in detail after an overview of the process and its benefits for various stakeholders.

Overview

A government taking advantage of all five components may begin by lending its support in planting a resident venture firm that will sustain perpetual entrepreneurial growth. The new firm can then sponsor ongoing venture education, training local venture capitalists through the Kauffman Fellows Program including curriculum relevant to the local environment and culture. This education includes cross-border modules that help member firms fully leverage the World TaSCforce infrastructure. Through this process, the local firm and trainees are connected to a global innovation network that empowers their local activities and yields competitive advantage in the form of access to information, research, and technology, as well as venture support from around the world. Both research, including tracking the latest worldwide technology trends, and thought leadership ensure that members of the World TaSCforce network can make globally minded decisions with up-to-date information.

In this way, the World TaSCforce platform enables innovation-based diplomacy for any government. A startup in any country may merge technology from Japan with innovations from Israel and Holland to launch a startup in their own locale.6 This arrangement can benefit local ecosystems by giving small businesses a necessary technological advantage and can more rapidly increase global innovation by bringing the best technologies to the local marketplace. In addition, local market knowledge of global technology forces competitors to alter their technological course.

With government support, the World TaSCforce engages public and private research groups to facilitate the commercialization of domestic technologies through a network of venture funds and incubators. This technology proliferation increases a country’s influence on global innovation and drives foreign capital to the originating research lab, once that lab’s innovations are licensed to a startup in the network. This effectively rewards research labs that generate the most practical breakthroughs, reducing their reliance on government capital.

The core initiatives of the World TaSCforce are as follows:

  1. Global Venture Education Initiative
  2. Cross-Border Venture Initiative
  3. Global IP and Venture Architecture Initiative
  4. Global Research and Foresight Initiative
  5. Venture Corps Initiative

1. Global Venture Education Initiative

Venture education is central to a country’s economic growth. Accordingly, the World TaSCforce offers the Kauffman Fellows’ Center for Venture Education as its educational foundation. The Global Venture Education initiative leverages proven Kauffman Fellows Program curriculum to train a government’s next generation of venture capitalists. Additionally, this initiative leverages partnerships with top-tier entrepreneur organizations as well as university professors to educate a country’s entrepreneurs with ongoing workshops and “boot camps.”

2. Cross-Border Venture Fund Initiative

Cross-border venture investing is a critical part of the World TaSCforce and serves as the operational hub of the organization. The responsibilities of the Cross-Border Venture fund initiative involve direct investment in cross-border startups and active collaboration support between member funds across various geographies. Consequently, of the capital we are currently raising, 40 to 60 percent of the funds allocated to this initiative are dedicated to co-investing with firms in the World TaSCforce network; and the remaining funds are used for direct investing and incubation.

Startups funded through this initiative can have a global vision and rollout plan from inception, and can make strategic use of the World TaSCforce’s globally sourced technologies and relationships. The structure of this initiative relies upon local venture firms with dedicated fund allocations as well as a centralized cross-border team whose allocation drives collaboration from a “big picture” view. Member venture firms operate locally, but regularly cross-pollinate with other venture capitalists within the World TaSCforce network as well as with the centralized cross-border team, which focuses entirely on how the member firms can best collaborate. Global team interaction ranges from sharing deal flow and technology to helping a member firm’s portfolio company reach global customers or launch a foreign branch earlier in the startup life-cycle.

3. Global Intellectual Property and Venture Architecture (IPVA) Initiative

The Global Intellectual Property and Venture Architecture (IPVA) initiative works with research groups and government agencies to give technologies life outside of the laboratory. Intellectual properly (IP) is effectively distributed by entrepreneurial means, not by the (currently standard) transactional IP brokering. Worldwide distribution of IP through entrepreneurial means rewards the application of technology and directly impacts local economic development. In exchange for giving the World TaSCforce access to technology,7 collaborating research groups gain a network of venture efforts all over the world that may choose to apply this IP into their products. As a result, research groups can focus on what they do best (research) and effectively partner with commercialization and business-focused venture capitalists, technologists, and entrepreneurs. The World TaSCforce thus enables technology portability as well as venture arbitrage, since great technology born in one locale may have a better market entry point in a different geography.

The World TaSCforce is composed of a network of affiliate venture firms as well as a cross-border investment team. The cross-border team works alongside the Global IPVA initiative to incubate startups whose products are the integral sum of technology components from the Global IPVA group. In addition, the Global IPVA team may choose to work with venture firms in the World TaSCforce network to build early-stage but large-scale platform oriented ventures. In this hybrid approach, the concept of “deal” shifts away from discrete, self-contained portfolio companies and toward a collaborative portfolio of technologies, team members, and carefully orchestrated partnerships.

Rather than (traditionally) funding a single company, member funds can choose to become a source for finding components to larger-scale ventures being architected by this team. For example, if the Global IPVA team is incubating a web application for window shopping, the Japanese TaSC Fund may source a next-generation user interface component to the application, while the Dutch and Euro TaSC Funds may source a product recommendation engine and ecommerce technologies. Together, these items can comprise the superventure: the web application the Global IPVA team ultimately builds. In this case, all venture funds involved may choose to syndicate the deal across countries with the help of the cross-border team. Alternatively, technology components can have effective8 licenses and revenue share when the web venture is successful. Another option may be to give each venture firm the option to launch ventures with identical technologies and their rights of use in their respective countries; the success or failure is then individualized to each venture fund. There are a multitude of structures that yield profit incentives for all parties involved.

4. Global Research and Foresight Initiative

The Global Research and Foresight initiative tracks worldwide innovation trends. These trends are developed by the Global Research and Foresight team and are augmented by “signals” received from forward-looking groups around the globe. The reporting of these trends is shared with LPs as well as corporate partners of the World TaSCforce. This improves the ability of associated venture firms to make quality decisions about technology deployment, investments, and global expansion of their investments. Additionally, the Global Research and Foresight team has developed tools to aid in crowd-sourcing signals and trends from individuals, which thus improve the ability of World TaSCforce network members to leverage industry experts for a sense of the micro-trends or for an instant reaction to an investment thesis from experts both inside and outside the World TaSCforce network.

The research function of this initiative tracks thought leadership concepts relevant to the venture—as opposed to technology trends—ensuring that World TaSCforce venture capitalists and entrepreneurs have up-to-date information regarding proven best practices as well as the newest perspectives that innovate on venture capital models. This Group also conducts venture-relevant experiments and generates whitepapers published within the World TaSCforce network.

5. Kauffman Fellows Venture Corps Initiative

While the World TaSCforce is designed for both the developing and developed world, the Kauffman Fellows Venture Corps (KFVC) initiative aims to transform the developing world by propagating entrepreneurship and venture capital in those regions. With the help of the Kauffman Fellows Program, the KFVC team designs venture-related curricula targeted to the local economy and culture, and trains a first generation of venture capitalists and entrepreneurs in developing countries. The venture capitalists in residence fuel entrepreneurship in their countries and are connected to the World TaSCforce network from which they can draw a wide range of support.

The KFVC effort births sustainable new businesses that earn returns, and the integration of emerging regions into the global economy. This blended value of social impact and financial return complements the World TaSCforce by creating prosperity and reducing geopolitical conflict in emerging regions. With the KFVC initiative, the World TaSCforce not only leverages a global network to empower local venture creation, but also leverages developed-world technologies and support to spark innovation in emerging world ecosystems.

Putting It All Together

Governments may blend World TaSCforce initiatives in any permutation between all-inclusive and stand-alone. For example, a research group in France may solely work with the Global Intellectual Property initiative to have their technologies distributed to portfolio companies. Additionally, large corporations may collaborate with the Cross-Border Venture Fund initiative in order to source innovation and partner with cutting-edge startups from around the globe. Moreover, groups targeting the developing nations may collaborate with the Venture Corps to use technologies collected by the Global IP initiative from other nations. Japan’s Ministry of Economy Trade and Industry may use all components simultaneously.

The process might begin with the Global Venture Education initiative training local venture capitalists and entrepreneurs. With our help, graduating venture capitalists may found a local fund that is government- and institution-supported via the Cross-Border Venture Fund initiative, which in turn connects this new fund to a network of other funds for collaboration. While collaborating with another venture firm in the network, both groups may use the Global Trend initiative to highlight areas of interest and validate their investment theses. Lastly, before launching technology companies from scratch, they may peruse the vast catalogue of technologies collected by the Global IP initiative in search for innovations that will short-cut their development time.

Conclusion

The launch of the World TaSCforce is ground zero for cross-border venture collaboration. Just as the Green Revolution doubled the worldwide production of grain, years from now, we hope our efforts will universally catalyze sustainable GDP growth without one region lending or borrowing benefit from another—instead, creating productivity where there was once a void.

Michael K. Madison II Michael K. Madison II

Michael is the founder of Cocoon Ventures, a venture firm with support from Mitsubishi’s Innovation Kitchen in Tokyo. Cocoon focuses on early stage cross-border investments between Japan and the United States as well as university-oriented venture models. Before Cocoon, Michael managed deal flow and was a portfolio company problem-solver at The Angel’s Forum/Halo Funds. Earlier, Michael was a Statistical Analyst and QA Tools lead at Tellme Networks (acquired by Microsoft), while simultaneously completing his MBA at UC Berkeley. Earlier, he founded Noble Science, a virtual surgery company that trained surgeons using an immersive 3D environment with tactile feedback. Michael started writing software in the 2nd grade, and was a code contributor in junior high to NASA Langley’s supercomputer management systems.

Koichiro Nakamura Koichiro Nakamura

Koichiro is a rare individual in the conservative Japanese culture in the role of serial entrepreneur. He started his first successful company during college and has spent the past ten years working on a multitude of startups. His current company, Mitsubishi Corporation, has allowed him to create relationships in the large Japanese conglomerates and provides the needed credibility for portfolio startups to find alpha and beta clients. Koichiro’s unique background and extensive network within the IT community, entrepreneurial circles, and established corporate world set him apart in Japan. Before Mitsubishi, Koichiro worked on many startups including Yahoo! Japan (founding member). He is a graduate of Waseda University in Japan and holds an MBA from the University of Chicago.


Back to top

1 Dave Pollard, Finding the Sweet Spot: The Natural Entrepreneur’s Guide to Responsible, Sustainable, Joyful Work (White River Junction, VT: Chelsea Green, 2008), 122.

2 TaSC = Technology and Science Commercialization.

3 Frankly, it takes little effort to imagine our inheritance of phrases like “carried interest” as potentially originating from shipping terms used on the Mayflower, or transactional terms used within the original 13 colonies as they sent crops and other goods back to their Old World investors, keeping some portion for themselves.

4 In fact, we are so hopelessly impressed by these companies that we know them by first name—McKinsey being short for McKinsey and Company, and Kleiner Perkins Caufield and Byers often shortened to just “Kleiner.”

5 A mashup is a software development term referring to the act of combining the functionality of multiple services into a single application. We submit that we can look at startups as a means of “mashing up” deals, and that the sum of the parts might represent exponential value increase as a full integration.

6 With the exception of intellectual property transactions that are not International Traffic and Arms Regulation (ITAR) compliant.

7 The nature of the technology access is determined on a case-by-case basis. The extent of the access depends on the agency: Some government agencies are not significantly concerned with profit, while private research groups may be very focused on profit. All approaches are welcome. For example, we currently work with agencies that give us exclusive use of their innovations without license fees or royalties, whereas others require deal-by-deal negotiation for each technology use and license.

8 The word effective here refers to the potential for World TaSCforce internal transfer pricing that produces proper motivation for all parties involved. This is similar to the way HP might increase sales by bundling a computer with a “free” printer. Internally, there is likely an effective transaction that does not penalize the profit and loss motivation of the printer business unit.

Back to top


KFR Volume 1 Cover

read next

  • Startups
  • Venture Capital
August 15, 2019

The First Institutional Round is Redefining Venture Capital

452 see what Kauffman Fellows had to say
  • Venture Capital
August 15, 2019

Venture Deals Fall 2019

331 see what Kauffman Fellows had to say