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Splunk cofounder: Corporate VCs are like a "fish out of water"

Sam Shead | Feb. 11, 2015
Michael Baum, a man very familiar with startups and investments, believes the traditional VCs are a safer bet than the new corporate investors.

Large corporates like Barclays, BBC Worldwide, John Lewis and Pearson have launched their own tech startup incubators in recent years and others like Santander and Travelex have created dedicated startup funds but a leading Silicon Valley venture capitalist has warned that corporate startup offerings may not be all they're hyped up to be.

Michael Baum, cofounder of big data giant Splunk and a VC with over 20 years experience in the Valley, said he's sceptical of corporate incubators and corporate VCs.

"I think it's like a fish out of water or like putting a square peg in a round hole," he told Techworld in London, where he was seeking out the next student entrepreneurs to join his Founder.org programme.

"Startups should go with a pure VC because they're completely aligned financially," he said. "The corporate VC is very often not. They're often more aligned project-wise with corporate initiatives that could change at any moment's notice."

Investors at "pure" VCs like Index, Balderton and Accel have usually started (or worked for) several fast growing companies in the past, meaning they have valuable startup experience that the corporate VCs may not.

For example, Saul Klein, a partner at Mayfair-headquartered Index, cofounded Kano and Seedcamp. He was also cofounder and original CEO of Lovefilm International (acquired by Amazon), in addition to being part of the original executive team at Skype (acquired by eBay).

However, several startups in the UK have gone on to secure what appear to be lucrative deals following a period of time in a corporate incubator.

For example, CrowdEmotion, a startup with facial recognition technology landed deals with Top Gear and Sherlock after a stint in BBC Labs, while Localz, was given £100,000 and the opportunity to trial its in-store digital engagement technology at several John Lewis stores after it won the JLAB competition.

Many entrepreneurs will shun money from pure VCs and corporate VCs because they're reluctant to give up equity in their business but the vast majority of today's biggest technology companies have taken investment at some point in their life.

Indeed, fast-growing UK firms such as Huddle, Shazam and Transferwise have all taken tens of millions of pounds from investors in the UK and Silicon Valley in order to support the growth of their businesses around the world.

 

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