“NOBODY HAS CRACKED THE CODE FOR MEASURING STRATEGIC RETURNS”

Since its launch, in 2013, GE Ventures has invested in more than 100 start- ups – and in 2015 it was named the industry’s top corporate venture firm by the trade publication Global Corporate Venturing. Chief Risk and Investment Officer David Mayhew spoke with HBR about how the organisation stays focussed on its goals.

Edited excerpts follow.

Q: How do you balance the desire for financial returns with the need to invest strategically?

A: We are very selective about what industries we invest in, and within each one we have well-defined themes that are highly strategic for GE’s businesses. Just by operating within those constraints, we’re addressing our strategic mandate. But you can’t focus only on strategic fit. Anyone in corporate venture capital who says they don’t also focus on financial goals won’t be around very long.

Q: What do you do to help portfolio companies succeed?

A: We are very hands-on, unlike a lot of corporate venture capital firms, which really just write a check and hope something comes of it. We work with our portfolio companies to adapt their product or service so that it can be tested and used by GE. We create distribution relationships for them. We introduce them to our global research centres and our business units. We invite them to our Crotonville training centre for management development. We use GE’s size and purchasing power to get them discounts on supplies. We assign them interns, on our dime. There’s a dozen or more things we offer, most of them unique to GE.

Q: How do you measure the strategic value you create?

A: That’s the number one question in our industry. It’s easy to measure financial returns, but nobody has cracked the code for measuring strategic returns in a meaningful, ongoing way. We use a checklist. Does the start-up sell products to GE, or does GE sell products to it? Are we codeveloping products or services? Does the relationship increase GE’s productivity, by lowering costs or improving our products? A large share of the start-ups we invest in check one or more of those boxes.