New York Life SVP on How Corporate Venture Capital is Changing in 2020

May 13, 2020

In this episode of One Quick Thing, Joel Albarella shares best practices for corporate venture funds looking to pivot quickly due to coronavirus. Albarella is the Senior Vice President and Head of New York Life Ventures. Since 2012, Joel Albarella has led the team in executing 29 venture capital investments, working with over 100 start-ups to facilitate “proof of concept” tests, and forming strategic partnerships with a select number of these businesses. 

The Venture Landscape Today: Triage Mode

When describing the state of corporate venturing today, Albarella says that many companies are in “triage mode,” looking for the strongest and weakest startups in their portfolio. “You have a lot of focus and analysis…around the economic well-being of portfolio companies,” Albarella says. “[Investors are] stress-testing some of the revenue metrics to…[scenario plan] around runways and cash positions.”

Due to that heightened focus on existing portfolio companies, Albarella predicts that some VC groups will be more protective of capital, and less likely to continue a steady pace new investments.

“VCs are very much saying they’re open for business, looking at new deals, but I expect a very significant down-tick in new money,” Albarella says. “I think [in] the first quarter, we saw some deals because those were probably in the works already. But certainly the second quarter, and probably the third quarter, [there will be less investment with] a high correlation to the kind of depth and breadth of this.”

What Industries Will Persist after COVID-19

Albarella notes that many startups have had to lay off some of their workforce. While the decision to downsize is always difficult, Albarella says, “A hyper-growth startup that’s cutting staff heading into this environment is a very healthy thing. It never feels good for employees of those types of firms, but it really shines a light on the agility of a tech company.”

But Albarella notes that other industries will face major challenges. The airline industry and cruise companies, he says, may be less elastic. Planes, ships, and hangars are all  depreciating assets. “People have short memories, so maybe [the travel sector] does come back,” he adds. “But that feels like something to me that might not come back.”

Launching a Successful Corporate Venturing Program

When launching a corporate venture capital program, teams may be tempted to compare their fund to traditional venture endeavors. However, Albarella says, corporate venture capital has a different set of priorities. “We really took an intellectually honest view of, ‘How are we going to bring value to the different areas throughout our organization?’ Then we hit the pavement. … We built trusted relationships, and it took time.”

Albarella also says that flexibility can help ensure longevity. “Organizations change, roles change, responsibilities change,” he says. “[A corporate venturing program] needs to be responsive to where the needs are within the business, and what the use cases are that are being developed.”

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Shifts in Corporate/Startup Engagement

InnoLead asked webcast attendees to share how they expect their organizations’ startup engagement strategies will change in 2020. Out of 36 respondents, 40 percent expected to pursue more startup collaborations.