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Innovating through the startup ecosystem Mark S. Brooks, MBA Associate Director, Innovation & Strategic Partnerships Association of International Certified Professional Accountants Innovate Carolina 2018 RTP 13 April 2018


Urgency to innovate

Why with startups

How with startups


In the 1920s, the average lifespan of a S&P 500 index company was 67 years

Today, that lifespan is about 15 years

3


Disruption is happening

63

%

87

%

4

of companies are experiencing disruption

of Fortune 500 companies in 1955 no longer exist today

44

of companies highly susceptible to future disruption

77

of CEOs find it difficult to get the creativity and innovation skills they need

%

Source: Fortune, Accenture Research’s Disruptability Index 2018, PwC CEO Survey 2017

%


Many “safe� industries are actually highly susceptible to disruption

Source: Accenture Research, Disruptability Index


Resetting roles and expectations of the professions Frost and Sullivan Global Research and Consulting analysis of job threat as a result of automation


The accounting profession will be unrecognizable in 10+ years American Association of Public Accountants is formed (now called AICPA)

The Institute of Cost and Works Accountants is founded (now called CIMA)

The phrase “generally accepted accounting principles” is first used

CIMA is granted a royal charter

AICPA makes peer review mandatory

Uniform CPA AICPA and exam is CIMA enter into computerized a joint venture

The Association by the numbers: 650,000 members and students in 179 countries 150,000 members employed by firms and employers worldwide 1,300+ professional staff located in 35 offices around the world providing insight and support for members and businesses and advocating on behalf of the profession 17 specialized credentials and certificates 2 premier designations – CPA & CGMA

CPA2Biz is founded (now called CPA.com)

AICPA + CIMA form the new Association

AICPA & CIMA launch the CGMA (chartered global management accountant) designation


“The best way to predict the future is to create it.” - Peter Drucker

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How corporates innovate - Build, Buy, Partner - Workshops - Labs - Idea contests - Structure

- Startup fund - … more…


Urgency to innovate

Why with startups

How with startups


Startup companies innovate well


Provocative innovations will come from startups and nontraditional players, not always from the belly of incumbents

Image credit: Andrew Gaule, Aimava


Startups are changing whole ecosystems

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62% of CEOs say they are looking at disruptive technologies to improve their business - KPMG


In the US in 2015, companies <6 years old accounted for: 11% of employment 27% of job creation

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Urgency to innovate

Why with startups

How with startups


We began with experience and desk research . . .

We read authoritative books such asâ&#x20AC;Ś

We scoured articles and academic literatureâ&#x20AC;Ś


We learned the most by interviewing 13 friendly CVCs and 1 friendly VC

â&#x20AC;Śand attended the Global Corporate Venturing Academy


5 elementary models of Corporate Venturing with Startups


Key recommendations from heads of Corporate Venture Capital 1

Define clear, focused objectives that expand the corporate’s core

2

Build simple and clear processes and structure

3

Establish easy to measure and strategically aligned success metrics

4

Make valuable contributions to startups, besides capital

5

Have patience and support (internal business units, executives, board)

No one size fits all

No magic formula

No recipe for exactly what you need to do


“Your team explores the art of the

What we learned: Strategy & Objectives

possible through practical examples.” Comment by former CFO of

• Financial vs. Strategic – Fundamentally the wrong question – By definition, financial approach will deliver strategic objectives and vice versa

Syngenta to the head of CVC

“CVC is required for any corporation that wants to last more than one generation.” AARP Ventures Fund

• Focus on themes, challenges, problems at the edge of the parent corporation’s core business

“Financial vs. strategic is fundamentally the wrong question.” Comcast Ventures

“If the startup is not financially viable, it cannot be strategic” Founder of Motorola Solutions

“Go low, go slow, go with what you know.”

Brand name and presentation title

Intel Capital


What we learned: Governance • Decision making – Make the group of decision makers as small as possible to facilitate speed

“Make your CEO and Board proud of what you’re doing.”

• Executive support

Contender Capital

– Critical to have support from the CEO/COO/CFO/CTO – Board involvement and support

Brand name and presentation title


What we learned: Reputation • Build relationships – relationship and reputation based

“Be present, be seen, be engaged”

• Be patient – It takes time Motorola Solutions

• Provide knowledge – The corporate must provide value to its networks of relationships

“The most effective crystal ball belongs to the

• Genuinely help startups succeed – Knowledge, guidance, subject matter expertise, and access to respective markets

CVC with the best deal flow and network to

evaluate it.” Masters of Corporate Venture Capital, p. 226

Brand name and presentation title


What we learned: Metrics • Strategic metrics

– New knowledge – New market or competitive intelligence – Brand positioning

“Even if a particular investment fails, it is still deemed a success if we learned a lot.” Second Century Ventures (National Association of Realtors)

• Financial metrics – New revenue

– Money saved

Brand name and presentation title


“Beware of these dangers,” they all said • Lack of strategic focus and clear objectives • Lack of commitment • Lack of relevance • Impatience • Go in too early on startups • Moving too slow


We selected the accelerator option Spin out

Acquisition

Accelerator

Direct Investment fund

Limited Partner fund

When to do it

- Commercialize corporate R&D output

- Scale - Fill a hole

- Test and insight - Budget or cultural constraints

- Gain insight - Financial return

- Gain insight - Financial return

Concept

- 3rd parties drive growth through your innovations

- Acquire technology or capabilities of a startup

- $20k + - Equity? - Cohorts of 3-6 months - Access, growth, hands-on

-

-

Pros

- Easy pathway to licensing - Retain IP

- Control - Ownership - Cost savings

- Low expense - Low risk

- First hand deal flow, high quality - Creates new ventures for corp.

- Low effort - Low risk

Cons

- Reliant on partners

- Integration challenges - Long lead times - Expensive - Culture - Talent retention

- Challenging deal flow - Competition for the best

- Resource intensive - Fiduciary duties

- Minimal control - Limited visibility

$10+ million Equity stake 3+ year return Investment committee

$10+ million Equity stake 3+ year return Hands off decisions


Association and CPA.com Startup Accelerator is focused on two themes

EdTech

FinTech


Association and CPA.com Startup Accelerator We aim to create a win for:

EXPERTISE

ACCESS

FUNDING

-

startups

-

accounting profession

-

organization

Start-up sweet spot is:

- EdTech or FinTech

Coaching, technical help, mentoring, knowledge of the profession

Markets, firms, members, customers, etc. where applicable

Capital investment with agreement for future equity

- From any country - Seed or pre-Series A - Functioning product or prototype - Solid roadmap - Strong talent

www.aicpaglobal.com/accelerator/


An advisory panel was recruited to broker expertise, advice, and coaching to startups • Atif Ansari, CPA, CGMA, CMA, ACMA – founder and President, Piik Insights • Gary Boomer, CPA, CGMA, CITP – founder of Boomer Consulting, Inc.

• David Cieslak, CPA, CITP – principal at Arxis Technology • Ian Hanning, FCMA, CGMA – CFO, Capital One Canada • Jenni M. Huotari, CPA – partner at Eide Bailly

• Kacee Johnson, MBA – founder of Blue Ocean Principles • Sabrina Parsons – CEO, Palo Alto Software • Ron Quaranta – blockchain expert, CEO of the Wall Street Blockchain Alliance

• Amy Radin – formerly CIO E*Trade, VP Product at AMEX, CIO at Citi • Mike Sabbatis – CEO, XCM Solutions


Strong outreach within the startup ecosystem Press release in June 2017

7,350+ views

Events attended by the team

500Startups, Finnovate, FinTech Meetup NY, FinTech Connect Boston, Unbound London

Trade show organizersâ&#x20AC;&#x2122; specific outreach

Accountex and AICPA Conferences

LinkedIn promoted campaign

Targeted only Asia, Australia, Europe 130k+ impressions

Other online presence

Angelâ&#x20AC;&#x2122;s List and CrunchBase

1:1 cold and warm outreaches

300+ to VCs, Angels, Startups, etc.


Engagement was high for our first cycle

35

7

13

4

Applications received

Countries represented

Invited to pitch

Selected for cohort


The first cohort was selected in consultation with an advisory panel

Transaction technology for alternative investments

Digital professional development and coaching

Web-based tax workpaper tool with trial balance function

Gamified talent and skills validation


Our first cycle runs ~6 months, through June 2018

1

4

Supporting Startups - Ongoing coaching, guidance, mentoring (e.g., global trends, blockchain, CFO voice, marketing, coaching by serial entrepreneurs, etc.)

Applications Due

Oct 2

Nov

Dec

Jan

3

Pitch Day

Feb

Mar

Apr

May

Jun

5

Convening Days

Graduate and announce second cycle


Thank you I welcome your questions, comments, and the opportunity to connect with and learn from you.

linkedin.com/in/markbrooks mark.brooks@aicpa-cima.com 1.704.467.4440

@mucello

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