The journey of the corporate venture capital group at many companies is short and bumpy.
According to Josh Lerner, a Harvard Business School professor who studies venture capital, the median lifespan for a corporate venturing initiative is about one year. As a result, “the professional VC community often views new corporate venture organizations as transient investors,” says Kurt Estes, a former corporate VC at Motorola Ventures. That can limit the number of deals that more established VCs invite them to participate in—since startup companies require investors who are there for the long haul.
Additionally, says Estes, many corporate venture teams “lack team members with a VC background,” which means they “have a bit of a learning curve as well.”
Despite those dispiriting dynamics, in 2015 the airline JetBlue decided to launch a venture capital initiative, JetBlue Technology Ventures. It paired a JetBlue executive and pilot, Bonny Simi, with a former entrepreneur and investor, Raj Singh. In almost three years of existence, JetBlue Ventures has put money into 20 startups, which are building everything from more localized weather prediction technology to artificially-intelligent assistants that can help small businesspeople manage their travel plans.
“Our mission is to stay ahead of where JetBlue is now—thinking beyond the horizon, two, five, 10 years out—and how travel might change,” Simi says. Singh explains that the key “yardstick” for the Silicon Valley-based ventures team is the impact on JetBlue overall—not solely the financial returns of each individual investment.
Here’s how they’re trying to do corporate VC differently.
Getting Off the Ground
Initially, part of the impetus behind JetBlue Ventures was to seek out sources of innovation where other airlines weren’t looking. “It was putting our stake in the ground,” says Simi. “There was no other corporate venture capital specifically in travel, and no [traditional] VCs that really specialized in it.” Once the initiative was announced, Simi says they were “deluged by startups,” receiving about 600 inbound inquiries. Sorting through those, Simi and the investment committee that had been set up decided to hone in on five strategic themes. Among them are “the future of maintenance and operations,” “innovation in distribution, revenue, and loyalty,” and “technology powered magnificent service.”
Five Investing Themes at JetBlue Technology Ventures
The investment committee is made up of three JetBlue executives, including Simi’s boss, Chief Digital & Technology Officer Eash Sundaram, and one outsider, Jim Adler of Toyota AI Ventures. They ratify every investment decision. JetBlue Ventures doesn’t have its own standalone fund from which it can invest. “The reason for that was to remain very close to the company’s strategic mission and [to] stay focused on how we make JetBlue better,” Singh explains. Investing off the company’s balance sheet “was also probably the easiest way to get going,” he says.
“We talk about an annual budget with our investment committee, and get approval for a certain amount of deals and money invested. We can do more or do less,” Singh says. “There’s no pressure on us to do a certain number of investments.”
Singh says that the JetBlue Ventures group has two facets: venture capital experience and a knowledge of JetBlue’s internal workings. “I think one of the reasons corporate venture capital has been ‘here today, gone tomorrow’ in a lot of companies is that both sides haven’t been covered,” Singh says. “We have somebody from the VC world, like me, who has done lots of deals, and someone who is well-connected and respected by the corporation, like Bonny, who can get the corporate mothership to actually buy into the deals that we are doing.”
Much of the team’s original focus has been on startups in Silicon Valley, though that is now expanding to include the Boston and New York ecosystems. There are also startups located in Georgia, Colorado, and Canada that have been among the first wave of investments.
Plugging In—Inside and Outside JetBlue
To get plugged into the information network in Silicon Valley that helps investors understand who is forming what kinds of companies, and which of those companies are out raising money, Simi says that her team has “attended a lot of pitch competitions and Y Combinator demo days,” alluding to the well-regarded startup accelerator. “We joined Rocketspace and Plug and Play Tech Center as a corporate sponsor, and also the National Venture Capital Association. We immersed ourselves in the ecosystem and pretty quickly rose to this nice place as a thought leader.” For startups focused on the travel industry, she adds, “there wasn’t anyone else occupying that space.”
Equally important has been plugging in to JetBlue functions and business units back in New York, where the airline is headquartered. (Three members of the JetBlue Ventures team members are based there, Simi explains, specifically to maintain strong ties.) Singh says that within the company, senior leadership has business objectives “that are visible to their peers. So we can see the objectives that the different business units have, and they can see ours.” The ventures team uses that information to understand which leaders “could benefit from our help,” Singh says. “We also look at the executives’ willingness to engage, and find that subset of people who are willing to engage and also have objectives we can help with.” He says it’s important to acknowledge that most functions and business units at the company have their own portfolio of forward-focused projects and growth initiatives. “We’re not trying to replace that, but we’re trying to add to that,” he says.
Last year, JetBlue Ventures organized a 12-week long exploration called “The Future of the Contact Center” in collaboration with the company’s call center leaders. One of the startups that emerged as having an applicable solution was Gladly, which helps to present a unified view of a customer across phone calls, e-mail, social media, and text messaging. One issue it solves, Singh explains, is the need to “accurately understand that the person dialing in was the same person who had emailed or tweeted. Gladly gathers it all together and presents it as one person.” The company’s software also can use machine learning to present call center agents with the answer that is likely to be the best one for the circumstance, given how other agents have responded to a customer need in the past. JetBlue Ventures set up a proof-of-concept test within the mothership and also made an investment in San Francisco-based Gladly.
JetBlue Ventures often drafts executives at the company to serve as board members, board observers, or as-needed experts for the startups in which it invests. And, Singh adds, “we go to all the senior leadership meetings, so we hear the things going on, and continue to build our relationships with others at JetBlue so we can understand what they’re looking for.”
But the JetBlue Ventures team can also make introductions within the company for startups that they opt not to invest in as well. That was the case with 8Tree, a startup that makes a scanning system to quickly inspect surfaces—like an airline fuselage—for dents. While there was a clear application at the airline for speeding up the inspection process, and getting planes back into service sooner, the ventures group wasn’t sold on investing. “We made the connection, and everybody is happy,” Singh says.
JetBlue Ventures regularly hosts sessions at headquarters focusing on emerging technologies and what’s happening in the startup ecosystem. Executives from New York occasionally come to the ventures office in San Carlos, California to host meetings and “see what we’re up to,” Singh says. “We act as extra eyes and ears—an advance scouting function,” he says. “Airlines are very operationally-oriented businesses. You can easily get lost in the day-to-day—and obviously, getting planes up in the air and back safely is the most important thing. So we can often bring a perspective they haven’t seen.”
As more of the startups in the JetBlue Ventures portfolio work with different parts of the core business, both sides derive value from the relationship. “We know that even more people within JetBlue will want to do that kind of engagement,” Singh says. “So far, things seem to be heading in the right direction.”
What’s Next
Simi says that JetBlue Ventures revisits its investment themes every year in February, to ensure that her team is focusing on the areas that matter most to the company.
The biggest change for the team since getting started is that “people have heard of us now,” Singh says. “We don’t necessarily have to explain to people what we do so much. And now we have more deals than we can handle.”
One new initiative at JetBlue Ventures is building a network of other non-competitive travel companies, so that when JetBlue Ventures puts money into a startup, it can make connections to a cruise line, for instance, or a hotel chain. “No startup is going to succeed with just JetBlue as a customer,” Singh says. The main goal is to help forge connections between startups and the allied travel partners. “If the partners want to invest, that’s cool, but it’s not a requirement,” explains Singh.
Advice for Others
For companies considering their own corporate VC initiative, Singh has advice: go slow. “Being part of an accelerator might make sense first,” he says, to get exposure to startups and make small seed investments.
Setting up a corporate VC group “requires a large amount of corporate commitment for it to work,” Singh says. “You need internal support at the highest levels of the company, because the payoff is multiple years down the road—it’s not a clear-cut equation of, ‘We did X and we got Y.’ You need people to understand that there are going to be failures. You need to have an open culture in the [venture] group, and the wider company.” It’s also essential, he says, “to be very clear about your goals: are you focused on financial returns or strategic returns?”
“And,” Singh adds, “you need to give it a fair run. It’s not something you should do for one year and expect to see any results.”
In other words, for results that are better than the median, you’ll need to improve on the median lifespan of a corporate VC initiative.
