CORPORATE VENTURING 2019 - THE FUTURE IS NOW - Beiten Burkhardt
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CORPORATE VENTURING 2019 – THE FUTURE IS NOW
2
TRAVEL,
TECHNOLOGY AND
INNOVATION
The travel sector early on embraced the wondrous new world Looking at the future, voice assisted booking, unified booking
of the internet and digitalisation. Maybe, because while the codes, even more transparent inventory, customer centric big
front end product always looked effortless (think beach, sun- data applications are drivers for the industry. Many great ideas
sets, drinks…), in the machine room of travel production, the wait to be nurtured in a world that combines the freedom of
juice that kept all flowing was data. Data for the consumer the start-up with the support of the established corporation.
to choose a vacation, data to get the traveler from point A
to point B, data that showed the hotelier, which person was Tipping a foot in the waters of corporate venturing therefore
coming to stay with him, data for the airlines and many more is an excellent idea especially for the travel industry. Corpo-
items. rate venturing provides fresh look at business, contact to
founders and start-ups and the ideas they provide as well as
Obviously, not relying on paperwork anymore, but on digital a window on technology. Corporate venturing is a remark
information, was a welcome change. Customers looking at able tool against the siloes often found in established orga-
destinations at their screen, having a bird's eye view of their nisations. The new approach can even lead to a new mode
hotel (thanks to cameras on helicopters), booking on their of cooperation within an established organisation. All these
machines and tour operators being able to adjust and price benefits far outweigh the mere financial aspect. Corporate
inventory within the fracture of a second changed amongst venturing is not only and not even mostly about financial
others the customer experience, production, handling of returns. They may happen, but they should not be the driver
claims, and inventory management. of the involvement in this field.
We are not yet at the end of this development and many more Corporate venturing can also establish a basis for new en
innovations wait. This is one of the reasons why corporate deavours of a corporation, that due to increased costs and
venturing is of utmost importance to the travel industry. Often, scope require a team approach. Digitalisation will require such
the outsider, the start-up, will not accept the general wisdom concerted team effort beyond the boundaries of an indivual
of an industry. There is a fresh insight and no acceptance of corporation; such team approach can be facilitated through
the mantras of stagnation: "it has always been this way" or corporate venturing.
"that cannot be done". Such innovation can come from out-
side the industry: Expedia was a Microsoft company, Booking Corporate venturing is a powerful tool, too often still over-
was not set up by industry insiders. Combining experience looked in the travel industry.
and fresh look, innovation and practical application through
corporate venturing can combine the best of both worlds.
We also face faster and faster routes to success and failure. Prof Dr Hans-Josef Vogel
AirBnB was set up just a bit over a decade ago and has bal- Lawyer | Partner
looned into a unicorn in just a few years. There is no indica-
tion that the speed will diminish. Rather, it is very likely that the
Unicorns of 2029 have not yet even been set up.
3
4
CONTENTS
Corporate venturing as leverage 6
for innovation in medium-sized
companies
The digitalisation of the tourism sector 13
Checklist: Employment relationships 15
About BEITEN BURKHARDT 16
About start-ups & venture capital 17
Our offices 18
5
CORPORATE
VENTURING AS
LEVERAGE
FOR INNOVATION
IN MEDIUM-SIZED
COMPANIES
“Paths are made by walking them.”
Franz Kafka
One of the biggest challenges currently facing German indus- As a consequence, German companies are expanding their
try is that the increased competition and strengthened digita- R&D departments, adopting digitalisation strategies and deve-
lisation caused by continuing globalisation means established loping “innovation campaigns”.
business models are being replaced by new concepts while
entire business lines cease to exist. However, R&D departments and innovation centres often lack
the necessary flexibility to leave the beaten path and develop
The solution to this challenge can only lie in the development new concepts and products due to traditional group struc
of innovative, high-quality products and improving internal tures, silo thinking and/or limited resources.
processes.
The method of choice for out of the box thinking is the deve-
lopment of strategic partnerships and networks.
6
“What one person
cannot do alone,
they can often do with
the help of others”
Aside from joint ventures, such as the numerous joint ventures
that we are currently working on either on a purely contractual
level or in combination with the formation of a joint venture
company, cooperation with start-ups is an especially promi-
sing driver of innovation for large and medium-sized compa-
nies – and is generally referred to as corporate venturing.
The forms of corporate venturing are extremely diverse and
greatly depend on the corporate group involved. This is evi-
denced by the companies represented on our discussion panel
today.
BSH Hausgeräte GmbH has established a two-track system
for its cooperation with start-ups. With the objective of deve
loping the “Future Home”, BSH’s internal Future Home Acce-
lerator Programme assists founders from all corners of the
globe with the establishment of their start-ups, provided the
business model of the start-up gives it the potential to contri-
bute to BSH’s business strategy. In addition in the “BSH Startup
Kitchen”, BSH – via the so-called Venture Clienting Approach –
identifies start-ups with promising technologies as future busi-
ness partners and suppliers. A short, joint pilot project with BSH
experts verifies the technical performance of the start-up solu-
tion in order to start further forms of cooperation.
The “Grip Equity Approach” taken by Linde AG is different, but
not less innovative. In contrast to classic corporate venturing
(see the diagram on page 9), Linde only invests in a start-up
if it has successfully completed a test project together with the
start-up and a global scaling of the jointly developed solution
appears possible within the Linde Group. This joint “debug-
ging” during the project phase ensures the strongest possible
connection between the start-up and Linde’s core business
and tests whether the cooperation actually works. Once the
project phase is successfully completed, Linde and the start-
7
up decide together which of the possible forms of coopera GENERAL OVERVIEW O F THE FO RMS O F
tion promises the greatest success for both companies; these CO O PERATIO N BETWEEN CO RPO RATE GRO UP S
can include a joint venture or classic equity investments, or AND START- UPS
hybrid forms and classic license models.
The diagram on page 9 contains an overview of the most
A good example of how the field of activity of the corporate common forms of cooperation between corporate groups and
group can impact on the form of cooperation with start-ups is start-ups. However, the success models of BSH Hausgeräte
SevenVentures GmbH, the investment arm of the ProSieben GmbH, Linde AG, SevenVentures GmbH and Drees & Sommer
Sat1 Group. SevenVentures is a partner for high-growth B2C show that tailoring the form of cooperation as much as possib-
companies, particularly in the consumer goods, retail and ser- le to suit the business model of the corporate group will have
vices industries, who have the potential to achieve sustainab- a significant impact on the success of the corporate venturing
le success by launching TV advertising campaigns. Zalando is programme. Perhaps you are interested in cooperating with
the perfect example of how companies can take advantage of certain start-ups and you have a product which you could pro
this to become market leaders or popular brands. SevenVen- vide as your contribution to the start-up’s success, allowing
tures current customer portfolio includes AboutYou, Casper you to invest relatively favourably in the start-up. Or perhaps
and tink. SevenVentures also supports enterprises seeking you have a goal in common with certain start-ups and can
international growth with media power, capital and all other develop a platform, bringing them together to benefit from
services of the ProSiebenSat.1 Group, a Group network com- the synergies of this cooperation. The possibilities are end-
prised of leading European media companies. less and should be explored in detail.
Digitalisation will yield profound changes, even in the very
diversified real estate and construction industry. In reaction,
real estate service provider Drees & Sommer decided to co-
operate with start-ups from the real estate sector – so-called
Proptechs – via the digital tool “Start-it-Up”. Big data is para-
mount: many players interact in the planning, realisation and
operation of properties and generate a large volume of hete-
rogeneous data. Those, who are able to clearly network this
data in a user-friendly fashion, will obtain results of a higher
quality much quicker than competitors which are not digitally
networked. Drees & Sommer offers proptechs space, mento-
ring, an environment, capital and the practical projects they
need to test and further develop new business concepts. If
it’s a brilliant business idea that can be scaled up, Drees &
Sommer is happy to throw time, development power, its net-
work and its strength on the market into the ring. For more
than 45 years, Drees & Sommer has been assisting public
and private developers and investors throughout the globe
with all aspects of the consulting on, planning, construction
and operation of property. Today, the firm’s services include
development consulting, project management, engineering,
real estate consulting, infrastructure and strategic process
consulting.
8
Incubator Accelerator (Classic) CV Partnerships
Role Support of start-ups in Support of established Support of start-ups Partnership with start-ups
their establishment start-ups through an investment for shared value
in equity capital
Advan- ■■ Office space ■■ Financial support ■■ Better market access
tages for ■■ Hardware ■■ Roll-out support ■■ Combination of
start-ups through the corporate products
■■ Management training
network ■■ Advantages over
■■ Support programmes
■■ Advisory board: guiding competitors
■■ Network
and steering
■■ Prospect of investment
Advan- ■■ Outsourcing part of ■■ “Beacon” role: view of ■■ Equity investment ■■ Expand group product
tages for their R&D role the developments of and associated range
corporate ■■ Quicker and simpler the future opportunities ■■ Appropriate licences
groups access to interesting ■■ Quicker and simpler ■■ Expand own product to acquire missing IP
start-ups for small access to interesting portfolio ■■ Competitive advantage
capital outlay start-ups for small
■■ Recruiting capital outlay
9
K E Y PO I N TS FOR S U C C E S S In addition, it is vital that the corporate managers are on board
and in line with the innovation strategy and that they lead by
Despite the success stories, corporate venturing is not always example. Employees will not display innovative strength when
successful. the management simply orders them to do so. Instead, the
management and the shareholders must first adapt their own
This will be the case when the partners fail to take sufficient processes, giving employees space to develop. The gradual
time to transform corporate venturing into a success story. integration of a start-up’s agile working methods into the
The amount of time that should be invested in the start-up will company’s own processes can be a good incentive for re-
vary depending on the form of corporate venturing involved forming internal processes on a general basis and is the first
and can be depicted as follows: benefit of cooperating with start-ups.
Incubator/Accelerator (Classic) CV Partnerships
Objective Foresight Access to the technologies Open new fields of business;
of tomorrow growth
Time that needs to
be invested
Return Development of new, long-term revenue New, short-term and lasting
on investment increase in turnover
In our experience, large and medium-sized companies often CO RPO RATE VENTURING IS NOT THE SAME
fail to reach maximum corporate venturing potential due to a AS PROJECT MANAGEMENT
lack of communication, both within the company and with the
start-up. In addition, the form of cooperation often does not Communication often reveals that the company’s involvement
suit the objectives of the chosen corporate venturing strategy. with respect to cooperation with start-ups has been wrongly
perceived internally as a project management role. Naturally,
it is important to agree on targets and milestones, so that
there is a rough joint timetable. However, it should be noted
that if the demands are too strict and there is a lack of in-
“Technology is key” dependence, creativity will be stifled and inventiveness cur-
tailed. This balancing act requires a mutual understanding of
and “Live your dream” the different working methods and corporate cultures and can
only be mastered with a clear corporate venturing strategy,
open communication, frank clarification of issues, regular review
of mutual expectations and intensive dialogue.
A classic symptom of bad internal communication is when
financial motives are seen as paramount to a corporate ven- SUITABL E CO O PERATIO N FO RM
turing strategy. Of course, other forms of investment are as-
sociated with significantly fewer risks for the company and Once the objectives of the corporate venturing strategy have
perhaps promise greater success than an investment in a been defined, the right form of cooperation needs to be
start-up, especially where a shareholding strategy is used. It is found. In addition to providing venture capital in exchange for
therefore important that the objectives of the corporate ven- (minority) shares, companies can benefit from providing start-
turing strategy are defined as clearly as possible: instead of up founders with additional support during the establishment
focusing on the financial investment and the possible return and initial development of their start-up, such as through the
on that investment, corporate venturing must focus primarily company’s internal “incubator” or innovation centres, e.g. by
on the transfer of know-how and on the “window on techno- making machinery available, providing access to software,
logy” that will facilitate the detection and identification of new and facilitating an exchange of views and information with the
technologies. relevant technical department(s) within the company. More
over, involvement in an external accelerator programme can
facilitate contact to numerous start-ups. Under a temporary,
intensive accelerator programme, rooms and technical infra
structure, business, legal or technical know-how and contacts
1011
to appropriate multipliers, customers, investors, etc., can be
made available to start-ups in order to “accelerate” their deve
lopment to market maturity. Incubators and accelerator pro-
grammes encourage communication between the company
and the start-up and thus increase the likelihood that the busi-
ness idea will be successful.
CO N C LU SI O N
Medium-sized companies should take a good look at the op-
portunities for cooperation with start-ups. There is no “one size
fits all” recommendation for the form of cooperation; sector-
and company-specific differences are just too great. However,
the fact that there is no “miracle cure” does not mean that
medium-sized companies should simply accept established
business models and concepts. Quite the contrary: innovation
doesn’t just mean the development of new products – with or
without the help of a start-up. It means regularly putting your
company’s own internal processes and organisational struc
tures to the test and critically reviewing them. Cooperation
with start-ups which work, for example, with agile methods,
can be an important catalyst. Finally, it is important to be clear
about the objectives that you are pursuing when you choose
to invest in a start-up, so that you can gauge which form of
cooperation will be most appropriate. And of course, the old
saying goes: “The fish stinks from its head down,” or “Prob-
lems start from the top.” If the management and shareholders
of a medium-sized company are not fully on board with both
the need to innovate and the planned implementation strategy
and fail to communicate and show their support for this need
and the strategy, it won’t be possible to break down old silo
thinking and establish the modern processes and methods
needed to develop new and innovative products – with or
without cooperation with a start-up.
Dr Gesine von der Groeben
Lawyer | Partner
Christian Philipp Kalusa
Lawyer
Dr Mario Weichel
Lawyer | Partner
12THE DIGITALISATION
OF THE TOURISM
SECTOR
The collection, analysis and use of data sets are central to DATA PROTECTIO N L AW
many business models, particularly for start-ups in the tou-
rism sector. The analysis and interpretation of data through Tourism sector start-ups process large volumes of personal
algorithms is then the product offered by such start-ups. The data in their daily business. However, as the value of the
ability to utilise large data sets will become a principal issue collected data increases, so do the data protection require
in the coming years. ments as well. The EU General Data Protection Regulation
(GDPR) has significantly heightened both the complexity
Digitalisation also has a significant impact on the business and importance of the protection of personal data. The pro-
models of start-ups in the tourism sector. Apps and platforms visions of the GDPR apply to companies that process per-
for “instant trip planning” or AI-based data management sonal data, regardless of their size. As start-ups often only
systems, which compile all the necessary information for your have a small budget for legal advice, compliance with these
holiday, are becoming increasingly popular. While travellers provisions can be a significant hurdle. However, failure to
often choose to book holidays without the help of classic travel accurately fulfil GDPR requirements will be regretted, at the
agents, they still do not want to undertake extensive planning latest when those companies are looking for strategic inves-
themselves. And the more spontaneous the trip is, the more tors. If it is revealed, that data collection infringed the data
popular online booking becomes. protection rules, your company could suddenly be worthless.
13O PPO RTUNITIES PRESENTED BY CO MPREHEN S I V E
DATA MANAGEMENT
Databases are significant assets for start-ups. An idea itself
cannot be protected under copyright law so that competitors
may, in principle, freely copy a business model subject to the
limits imposed by competition law. Conversely, while copy-
right law will not protect individual data, the compilation of
that data in a database may be protected.
In any case, databases are essential for bringing order to the
flood of information. They will have protection under copy-
right law when the data is compiled and arranged in a syste-
matic or methodical way and the nature or scope of obtaining,
verifying or presenting said data has entailed a substantial in-
vestment. This is designed to protect economic performance.
The way in which the information is compiled is the added
value that makes the database worthy of protection.
Personal data may only be processed and stored with consent
or when there is a legal basis to support it. This is especially A large database that is protected by copyright can be a sig-
critical when particularly sensitive data is processed. This in- nificant competitive advantage.
cludes information about race or ethnicity, political opinions,
religious beliefs or health data. Presumably, such data will be CO NCLUSIO N
transferred when passengers indicate physical restrictions as
part of their booking or choose a specific meal option, such Even if tight budgets mean many start-ups often put the pro-
as halal. This information is often relevant for hotel and flight tection of data against misuse or unauthorised use by third
bookings. parties at the bottom of their to do list, it is worth thinking
long-term about this issue. In the future it will be vital that data
It is therefore even more important that data protection protection requirements have been implemented properly,
issues are taken into account from the onset when implemen- not least during negotiations with possible investors, where –
ting business ideas or developing products. This can help due to the severe punishments that apply in the case of in-
avoid the rude shock that results when the plan to develop fringement – compliance will play a role that should not be
an app or online marketing solution fails on data protection underestimated.
grounds or where the legal standards are so high, that the
plan cannot be implemented.
There are also hurdles to outsourcing data processing to Dr Julia Thöle
third parties. Order processing, for example, requires that Lawyer | LL.M. | Partner
cloud providers do not use the data for their own purposes
and that clients ensure the necessary technical arrangements
for data protection are in place. Data may be transferred to
third parties without the need for separate consent, provi-
ded that there is a written agreement on order processing. In
addition, data protection rules will be relevant to booking Helen Trimbusch
systems on websites, where the booking information is saved Lawyer | LL.M.
on the external servers of service providers.
14CHECKLIST:
EMPLOYMENT
RELATIONSHIPS
■■ Contractual / Post-contractual non-compete clause: During
their employment, employees may not work for competi-
tors. A post-contractual non-compete clause for a maxi-
mum period of two years, in exchange for the payment
In order to minimise the risks for investors, CVC investments of compensation (50 % of the current salary), will prevent
are often subject to certain conditions. Frequently, one of employees from working for competitors after the end of
these conditions is that legally watertight employment con- the employment relationship, too.
tracts have been concluded with the employees of the start-up.
Here are our top 7 issues that start-ups should be sure to in- ■■ Confidentiality: Business and trade secrets are better pro
clude in all employment contracts: tected if employment contracts include confidentiality rules.
■■ A trial: Use an unpaid, non-binding trial period of one to ■■ Forfeiture provisions: The agreement of forfeiture pro
two days to allow you and the potential employee to get to visions provides greater legal certainty with respect to
know each other, without any obligation on the potential employee claims and can save a start-up a lot of money.
employee to perform any duties.
If you have any employment law questions, please feel free
■■ Probationary period: The employment contract should to contact us at any time.
include a probationary period of a maximum of 6 months
for the parties to get to know each other. A shorter notice
period and simplified procedure to terminate the contract
apply during this period. Dr Michaela Felisiak
Lawyer | LL.M. | Partner
■■ Fixed term: Greater use should be made of limited term
contracts, whether or not there is a reason for the tempo
rary arrangement. The employment relationship will termi
nate automatically once the term expires, without the need
to issue a letter of termination or pay a settlement.
Dr Erik Schmid
■■ Copyright / Employee inventions: For start-ups, in particular, Lawyer | Partner
it is essential that copyrights and employee inventions are
legally assigned to the employer; this secures rights and
saves money.
15AWAR DS
ABOUT
BEITEN BURKHARDT
BEITEN BURKHARDT is one of the leading corporate law firms
in Germany and advises on all areas of commercial law.
Our roots are in Munich, but we have offices in Dusseldorf,
Frankfurt, Berlin and Hamburg, as well as in Belgium, Russia
and China. We also operate a number of “desks,” which have
specialist expertise in bilateral economic relations. Our busi-
ness partners include multinational groups, companies listed
on the stock exchange and medium-sized companies, as well
as foundations and the public sector.
What distinguishes us is the personal and dependable advice
we offer. As a client, you will find more than just 290 strategi-
cally thinking lawyers, tax advisors and auditors. You will find
290 dedicated partners, who have a special understanding
of your needs and matters and will work with you to develop
individual solutions.
FOUNDED IN MUNICH
*1990
OFFICES
Beijing, Berlin,
St. Petersburg
Brussels, Dusseldorf,
Moscow Frankfurt am Main,
Hamburg, Moscow,
Hamburg
Berlin
Dusseldorf
Frankfurt am Main
Munich, St. Petersburg
Brussel
Munich
LAWYER S WOR LDWIDE (0 2/20 19 )
294
LAWYER S IN GER MANY (0 2/20 19 )
Beijing 262
LAWYER S INTER NATIONAL (0 2/20 19 )
32
16ABOUT START-UPS &
VENTURE CAPITAL
We advise start-ups and business angels and other providers
of venture capital.
In order to successfully turn their ideas into action, the first
step that start-ups will often take is to conclude contracts with
service providers, employees, customers and, last, but not
least, investors. Yet commercial success requires a legal and
tax-optimised structure from the very start. As a commercial
law firm, we provide entrepreneurs and start-ups (early and
later stage) with comprehensive advice for the successful
start, sustainable commercial growth, attracting investors and,
naturally, for the exit. A solid and well-negotiated contractual
basis facilitates the operation and expansion of the business
and creates mutual confidence. It is also important to us that
our clients always negotiate on an equal footing with inves-
tors and all other business partners.
We develop tailored, innovative solutions, based on our expe
rience and the needs of our venture capital clients. Our ven-
ture capital team can access the know-how of our colleagues
from all related areas of law at any time. Combined with our
deep sector knowledge in the areas of digital business (in
particular FinTech, InsureTech, MedTech, AdTech, games, me-
dia and telecoms), travel and travel technology, life science
and cleantech (in particular renewable energies and energy
storage), we provide efficient advice of the highest level. Our
large network also offers interesting contacts for our clients
for the expansion of their portfolios.
17OUR OFFICES
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