Jim Sayre is President of Cargill Ventures, the venture arm of Cargill, one of the world's largest and most innovative agricultural and food related technology firms. Jim was also the Director of Mergers and Acquisitions for Cargill, giving him a hands-on view of both acquisitions and corporate venturing as tools for expansion and innovation.

Jim points out that while Cargill's venture group is a business unit with a for-profit mindset, it also exists "to accelerate access and adoption of key technologies to our core businesses."

Cargill operates with a well-defined methodology for identifying investment targets:

"First we go to R & D and business units with interesting technologies, and ask them to assess whether the technology may be relevant to the industry (not just Cargill), and to perform technical due diligence.

Next, we determine whether we as an investment group think that opportunity has an attractive ROI.

After this is done, we then look at the relevance with Cargill, in what we can contribute to accelerate the growth of investment target.  Naturally, this presumes that an investment will be mutually beneficial for both the target and for Cargill."

This disciplined approach leverages incumbent strengths, while also creating a pipeline of new technologies for use by Cargill.  . Most importantly, these opportunities have been carefully scrutinized for applicability, feasibility, and business potential.

In this way, corporate venturing activities are also complementary to internal corporate R & D efforts.

"My experience with technology and innovation is that some of the best and smartest technologists are inside of the company rather than outside in the marketplace, but they are doing things which are much more consistent to the core business rather than second order technology.

You want to have a web of interaction across your marketplace. This includes understanding and participating in areas that are relevant but not necessarily applicable to achieving you short term mission." 

Jim stresses that returns from venture funding typically comes 6-10 years out. Corporate venture funding allows large firms to free themselves of the 3-5 year constraints of typical strategic planning, and look at more radical "second order" technology.  Since these types of technologies are the most likely candidates to have a disruptive influence on markets, it protects large firms from the competency trap. 

Finally, Jim points out that every corporate venture fund has a different objective and operating method. 

"Executive objectives, key measures, staffing decisions and compensation structure all dictate the approach and risk profile of a corporate fund. Outbound, innovation, and ecosystem venture strategies all have applicability depending on objectives, but the key is to align the people and structure with the strategy."

While access to a corporation's knowledgebase, internal team, and complementary assets can be an advantage, a corporate venture fund that doesn't allow both the investment team and the portfolio companies to be free of certain corporate constraints will be less effective.

From Hunter or Hunted - Chapter 4