“Change everything except your wife and kids.” said Samsung’s CEO at the Davos World Economic Forum in 2013.
The South Korean giant hasn’t taken the sentiment lightly.
It spent 6.5% of its total revenue on R & D in 2014, clearly signalling intentions to innovate its way out of trouble.
The Global Innovation Center is one such example. Hot Topics caught up with its VP, Jacopo Lenzi to find out more.
What is your main focus within the Samsung Global Innovation Center ?
I lead Business Development and Strategy for the Samsung Global Innovation Center , which includes teams dedicated to acquisitions, early stage investments and strategic partnerships.
We contribute to the overall Samsung mission of excelling in both the hardware and software and services space by acquiring and partnering with innovative startups such as LoopPay (now Samsung Pay) and SmartThings, as well as supporting new product launches, such as Gear and Gear VR.
On the corporate venture side, we provide entrepreneurs more than just financial resources, which our 30+ portfolio companies can attest to. For example, most of our portfolio companies have explored business collaborations with Samsung, and some, such as LoopPay, were acquired at a later stage.
How do you ensure access to the top talent?
Top talent naturally gravitates to places where it can make the most impact.
We are a small team that works closely with Samsung’s senior leadership which helps in staying focused and delivering towards the future needs of the company.
That is an exciting opportunity that is not always possible within large organizations.
What are the big bets that the Samsung Global Innovation Center is interested in investing in now and down the line?
Our current hotspots include connected devices and VR, and we are generally focused on enabling open platforms that deliver on meaningful cross-device user experiences.
However we purposely do not limit our scope. What I find interesting is that the strength and also challenge of working for an organization as diversified as Samsung is its breadth of operation.
This provides us with a healthy dose of evaluating and adjusting our focus to reflect what we see actually happening in the market.
How do you advise startups to approach Samsung?
Samsung is a very large and complex organization, and it can be both confusing and intimidating for a startup with limited resources.
You are best served by first being very clear with yourself about what you need from an organization like ours.
Sure, there are a number of ways we can work together. But what would be THE thing that would make the most difference to YOUR business?
And which group within Samsung might this be most relevant for?
My advice is not to get lost in trying to accommodate Samsung or any large corporation’s needs. If it isn’t strategic, it won’t be a successful partnership.
When would you acquire a startup versus investing or partnering?
We initially approach conversations with a startup in a structure-agnostic fashion.
If the Samsung Global Innovation Center is primarily interested in the current product and you are simply attracted to Samsung’s reach, a partnership is usually the easiest (and quickest) way to deliver value to our respective users.
But often startups come to us at a time when their offering is not yet mature enough to be rolled out globally to millions of users.
In that case, we may invest to stay close to a promising team, while facilitating conversations and collaborations with internal stakeholders.
Or we may consider an acquisition if we see great talent that has the potential to act as internal leaders within their areas of expertise.
One thing to note is that we do not necessarily view acquisition as the most ideal form of collaboration. An acquisition is forever, so we don’t usually buy companies for the current product or business.
We often do it primarily for the talent and the potential that we believe they have for creating great products down the line.
What is the key to a successful acquisition?
Success is not about the transaction, but delivering on what excited both sides about the deal in the first place.
In my opinion, a successful acquisition comes down to two things: alignment of vision and thoughtful integration.
Our acquisition process focuses from the very start on exploring whether the two sides are on the same page and are equally passionate about a desired goal.
If the negotiation is primarily about price, that is usually a sign that the deal may not be ideal in the long run. If the target’s management team wants to do right by their investors, but is just as excited about the value they will create together with us going forward, that’s the team I would be willing to advocate for.
The second key factor is thoughtful integration. At many companies, the integration team may not be invited to participate in a deal until after a term sheet is signed, or only after the deal closes.
At the Samsung Global Innovation Center, the integration team is involved from the very start of a process. How are we to determine what a company is worth if we aren’t clear what we plan to do with it? How are we to advocate for a transaction if we are unclear if we can capture the value?
Our integration colleagues help the transaction teams focus on what matters. By doing so, they reduce opportunities for frustration during delicate deal negotiations or diligence sessions.
That helps build the needed trust well before the deal closes, and sets the teams up for a likely successful execution.
I hear so many stories of ham-fisted deal processes completely souring the relationship between operating teams before the ink is even dry. Great integration teams are the unsung heroes of successful acquisitions.
What are your top tips to a startup that wants to be acquired?
Don’t focus on wanting to be acquired. We are not interested in acquiring someone who is only optimizing for an exit.
We are looking for passion to change an industry, and we want to take part in that passion.
If you are approached or asked to consider an exit, be clear about why an acquisition is in the best interest for your end users.
Focus on finding the right acquirer for your team and your users. We sometimes forget that acquisitions are a repeat game.
Your reputation as a seller and ours as a buyer follows us from deal to deal. It’s a small world and your biggest advocate or enemy is your reputation for managing through these pivotal times with grace and fairness to all the various constituents.
Why were SmartThings and LoopPay interesting to Samsung for acquisitions?
They are two very different deals in two very distinct markets, the smart home (IoT) and mobile wallet payments. Despite these differences, the drivers of our interest were remarkably similar.
They were both leading technology players in important emergent verticals. Both differentiated themselves from their competitors by focusing on a primary bottleneck of their market’s development (limited use cases for connected devices and antiquated point-of-sale terminals, respectively). And both were led by a team who was over-the-top passionate about how they aspired to rewrite the rules of the game in their field.
Neither startup was looking to be acquired when we first started talking to them. As I mentioned earlier, LoopPay was initially an investment, and both were being considered for partnership opportunities. However, it soon became clear that we could best help these entrepreneurs realize their vision through a closer strategic involvement.