Corporate Innovation Strategy, the Future Consumer, & Diverse Founders Initiative with Brandon Hoffman & Antonio Key, Samsung Next

Welcome back to our latest installment of the Innovation Coffee Break. This transcript has been edited for clarity. 

Vijay Rajendran: Welcome to your Innovation Coffee Break with Brandon Hoffman and Antonio Key from Samsung Next. This series features unique conversations with leaders from the world of innovation and startups—all in the time it takes for a cup of coffee. We’re excited today to be joined by Brandon and Antonio. 

Brandon Hoffman: Happy to be here. Thanks for having us. 

Vijay Rajendran: Perhaps we can start by talking about Samsung Next and how it’s different from the Samsung that most people would know? 

Brandon Hoffman: Samsung Next is the innovation group within Samsung Electronics that’s solely focused on software and services. Samsung Electronics is headquartered in Korea with 300,000 plus employees. It’s an incredibly successful hardware consumer electronics business —smartphones, visual display, TVs, digital appliances. Our job is to complement that hardware with software and experiences. 

Antonio Key: We have a ventures team, a partnerships team and an M&A team to help entrepreneurs plan for and to meet the needs of this global audience. We also have an internal product team which builds the experiences that we wish to see in the world. 

Vijay Rajendran: Very cool. Antonio, to build on that, how long has Samsung Next been investing in startups? 

Antonio Key: Samsung Next has been investing in startups since 2013. We have an active portfolio of approximately 65 startups. And since 2013 to today, we’ve had over 100 investments over the life of the fund. We do this through a 150 million dollar venture capital investment fund, which aims to increase Samsung’s global support for early stage startups cultivating software service innovation. 

Vijay Rajendran: So given what you’re trying to do, are there any stages that you’re interested in either investing or partnering in and particular verticals that are most relevant to? 

Antonio Key: Yes, so the fund focus is traditionally on Seed to Series B. I would say our sweet spot is series A. We have four focus areas in our fund. First is media tech. That would include B2C and B2B technology that’s powering immersive or interactive and hyper personalized experiences such as gaming or mixed reality. Another vertical is digital health that  focuses on health and fitness startups delivering better consumer health outcomes with more convenience and personalization. A third focus area is going to be frontier tech that can encompass quantum computing and artificial intelligence. And the last focus area would be edge computing, which focuses on technologies that help decentralize infrastructure–such as computing power, security and networking–to the edge, closer to end users. Most recently, we have a horizontal thesis that has emerged on the Future Consumer which Brandon can touch a little bit on. 

Brandon Hoffman: As a horizontal, I think this is important. Really, the value that it’s adding is to ensure that we don’t miss out on important opportunities that are more consumer-facing. A strength of our venture team, and a lot of the work that we’ve done to date, is on the deep tech side, a lot more of the product and technological innovation. It’s forward looking, but it’s maybe not as consumer-facing, maybe not as driven as by business model innovation or novel ways of going to market and such. 

“We want to make sure that the work we’re doing is complementary. Now consumers and society and users of technology have become much more complex and on many levels, diverse, empowered and expressive.” 

Vijay Rajendran: I’d love to zero in on that. The whole idea of increasing the diverse consumer focus, how do we get one size fits one? Tell us about your Diverse Founders Initiative. 

Antonio Key: The Diverse Founders Initiative is an internal grassroots initiative that was developed to ensure that we don’t miss out on innovation often hidden in plain sight, whether that’s due to race as previously mentioned, gender or geographic location. 

We feel like we can have a real impact to continue to facilitate that upward trajectory through our first initial vehicle, venture capital. But we don’t want to stop there. We want to help after we provide the requisite growth capital. We want to bring them into our portfolio, provide them with the resources and relationships to properly scale and ultimately graduate into relationships such as commercial partnerships or potential acquisitions that can strategically benefit not just the founder and the locations in which they originated, but also strategically help the growth of Samsung. 

Vijay Rajendran: That’s awesome. I really like how you are thinking about this in terms of where capital is constrained and how you want to jump in to help those builders of tomorrow. And certainly, where accelerators like 500 Startups are at the seed stage, we want to see people downstream like ourselves who are investing in supporting diverse founders from an inclusion perspective. After the accelerators such as ourselves are involved. So that is very exciting to see. 

Curious, though, these things don’t magically appear out of nowhere. How did this get started?

Antonio Key: In 2018, we attended AfroTech, the preeminent event for black techies in the country. At this conference, there were a lot of interested tech corporates really looking to make progress on their D&I capabilities. At this event, the programming was bifurcated into two tracks. You had the engineering track and you had the entrepreneurship track.

I think the insight that we had was that all of these companies were in attendance, really focused on making progress in terms of engineering related jobs, which is important in its own right. We noticed that a lot of these corporate brands that were present on the engineering track were noticeably absent on the entrepreneurship track. We saw this disconnect and we call it an arbitrage opportunity for Samsung Next. 

We spent the better part of 2019 proving out our hypothesis that there isn’t a pipeline problem, that there are capable founders out there that are strategically aligned with some of the goals that we’re trying to achieve here at Samsung Next  and that are building software and service innovation companies. 

Now moving forward into 2020, we’re going to take this next phase, which is how do we start to close the funding gap? That’s where we are today.

Vijay Rajendran: You spoke to one of the things I was going to ask about in terms of…how are you taking a step back and looking at progress so far? I’m curious, what kind of resources have you been able to do this with? There’s a lot of people who may be listening and saying, I’d love to do this in my organization, but, I’m sure you have special budgets and quite the arsenal these days to get to fulfill our dreams here. 

Brandon Hoffman: I think that’s a great question. To start, we didn’t have many resources. We had passion and determination to get the ball rolling. Taking that first step of breaking that inertia is probably the most difficult. It really just came down to sweat equity, really. It was nights and weekends while pushing to outperform in our day jobs. But, we did the work that needed to be done until we started to get a little bit of traction and break from that inertia.

“Now is the time to act. Now is the time to really just get it done. Initially that might just be letting your passion push you and take that first step alongside others and a lot of great work can be done out there.” 

Antonio Key: I do want to make one point. I do agree with Brandon that resources at the start were limited. But we also have a culture at Next where you’re encouraged to pick up the banana peel off the ground, if you see it, rather than just pointing it out. This is how we approach problems, and so it was only natural for us to lean into this problem and work to create the solutions

Vijay Rajendran: That’s really exciting, more about Samsung Next as a whole. From where you both sit in the innovation landscape, curious, from what you’re seeing, has innovation slowed down in the downturn that we’re experiencing right now? Brandon, when you look across the entire spectrum of verticals and markets you’re in, are you seeing things get slower? 

Brandon Hoffman: Taking a step back and again thinking of both the needs of the consumer and what we can deliver through both hardware and software, and seeing how the needs have really become even more apparent, and during these times, frankly, I think that the need for innovation on an even broader scale has become clearer. 

Look inside the home. Many homes are smart homes and Samsung is fortunate enough to be inside many homes throughout the world. All of a sudden, parents are not only parents, but they’re employees still from home. And then they’re teachers of third grade and sixth grade. You’re trying to figure all of that out. At the core of even just that alone is the need for devices, connectivity, and when the stress test of all those things was kind of applied because of this pandemic, the divide, I think, was made even more apparent, of those who have and those who have not. When it comes to the devices that are necessary or the connectivity that is adequate, let alone then the content that is needed to engage and teach children or beyond that.

If you really just start to pull even at that one thread, it becomes very clear how important technology is, how important the role that Samsung has in people’s lives and those households. So from an innovation standpoint, I think if anything, we are pushing ourselves as the innovation group to think bigger and to really push ourselves, maybe even outside of our comfort zones or core focus areas to address these needs and make sure that we put the consumer first.

“Which is why this overarching theme of future consumers is, frankly, more timely than ever as we think of everything from a pandemic to the expectation of racial justice that we’re seeing in society, and that is in every corner of the world with protests and unrest.” 

Vijay Rajendran: On that note, do you see VC and CVC being able to make a change after COVID and after like this movement towards racial justice that is so pronounced this year? 

Antonio Key: I think they’re going to have to make a change because there’s increased scrutiny and it’s not just outward, it’s inward. You have fund managers that are recommending that large, anchor LPs (limited partners), such as endowments and pension funds, do a better job of providing opportunities for emerging diverse fund managers, starting by first making transparent the diversity statistics of their LP portfolios. Additionally,  we have witnessed an increased focus from  corporates who are not just making charitable donations to social justice nonprofits, but also are allocating hundreds of millions of dollars of venture capital toward specific diverse founder set asides or to fund of funds vehicles focused on diverse fund managers. 

What you don’t want to do is be the corporate that doesn’t do anything…that inactivity is you being complicit. And to Brandon’s point, with respect to the future consumer, what needs to be stated is, the future consumer is going to be increasingly more diverse. For venture capitalists, especially those on the consumer front, the end consumer of their products is increasingly diverse. Ultimately, you need to find products that meet the specific needs and provide value propositions for those consumers. Our hypothesis is that founders with similar lived experiences to the consumer audience they are serving, are well-positioned to identify the needs and solve the pain points of their key customers.

“It makes good business sense to be intentional about seeking and finding the top diverse  founders because it’s going to lead to more alpha and higher returns.” 

Vijay Rajendran: I guess what I’d love to kind of wrap with is what advice would you give to others who are new to the CVC world and what kind of like legacy or impact would you like to have? 

Brandon Hoffman: I really think now and moving forward is just a huge opportunity, at least specifically for corporate venture capital. You’ve started to see CVC funds be a greater and greater percentage of the total funds that have been deployed. 

I think the strategic imperative for corporates and brands to source innovation and create innovation that is inclusive and representative of the population is sort of this intersection that’s just providing a very ripe opportunity for CVC. I think these are very interesting times. Anyone who has a passion and drive again towards impact would uniquely be able to do so through CVC, and so I would push them to think about the ways that they could organically and strategically add that value to whoever and whatever their corporate parent company is. 

Vijay Rajendran: Antonio?

Antonio Key: I think from a legacy perspective, I want us—and when I say us, I don’t just mean me and Brandon, but want Samsung Next—to be recognized as a spark that was able to change the perception of what innovation looks like, not just within Samsung Electronics, but within the broader tech & business ecosystem. I want leaders and investors  to value the dollars of diverse consumers in the way that they value the dollars of those that work and live in the San Francisco & Silicon Valley community. I want leaders and investors to rethink what innovation looks like, where it comes from, and I want to do so authentically, the right way. When I say the right way, it’s not a knee jerk reaction or something out of guilt in the wake of the social injustices that happened a couple of months ago. It’s rooted in not just experience, but it’s rooted from a place of real compassion, of genuine interest to bring people together and to do the right thing. 

Vijay Rajendran: That’s amazing. I know many mountains will move. Let’s leave it there. Antonio, Brandon, thank you so much for joining us today for this coffee break. Looking forward to continuing the conversation and working together and watching your success.