Over 600 business leaders from the corporate venturing ecosystem attended the Global Corporate Venturing and Innovation (GCVI) Summit in Monterey. Rob Salvagno, VP of Corporate Development, headlined the Keynote Interview. Below is the video and transcript from his onstage interview with GCV founder, Jim Mawson.
Jim: We’ve got a super packed day. We’re delighted to have heard from Sue Siegel, Wendell Brooks, Young Sohn and a host of others. But, from my point of view, this is a real highlight for these two days. We’ve got Rob Salvagno from Cisco. He’s the Head of M&A and Investments. He is a real superstar. Cisco, we’ll get on to their report card shortly. But I wanted to start Rob, very briefly with a quick thought, which is John Chambers, your former CEO, ran the business 25 years or so. He’s just left. He set up his own VC firm. What did he learn from watching what you guys had done for so long that really made him want to do this.
Rob: Sure. Great question Jim. And thank you for having me. I think that what John saw is really what's been part of Cisco's culture for a long time, which is, investments in M&A being a core part of our innovation strategy. And it also goes to the value proposition of what Cisco Investments offers. And also I think what John is trying to do which is, how do you really bring a unique value proposition to your companies? A big part of that is about scaling the business.
I think John knows a little bit about that from running sales at Cisco and then of course, being CEO for the last two decades. And that is sort of similar to what we're doing with Cisco Investments, in terms of helping our company scale. And so, I think you see multiple threads there that he probably pulled from us as he's gone on to his next career.
Jim: Great. Well, thanks very much. I do think it's interesting that both him and Ken Chenault from American Express have kind of viewed venture their next step that there's something exciting that's happening in this ecosystem. It's probably the coolest place to be in finance I would say. But, in terms of for Cisco, could you give us a sense of report card of what you guys have been up to in particular, since you've taken over?
Rob: Sure. I had the fortune to step into the leadership role a little over two years ago, which is coincidencentally when Chuck stepped in as our CEO as well. And I think Cisco's been on a real transformation pace, both with M&A but also using investments to help inform that. And so how is that materialized? Today we're investing about $150 million a year. That's really split between two types of investment styles. About half of our investments are around Cisco's core businesses, security, collaboration, data center, where companies have a very close tie to our existing business units. The other half of the investments that we do are really outside of that.
We're really looking at next horizon opportunities that may shape the future of IT. And, I think having that flexibility allows us to both be relevant to our core businesses today as well as potentially find that next Jasper or AppDynamics in the future.
Jim: Oh, that's great. And if you kind of have a sense of obviously, two years into role, Cisco had been doing investments 20 plus years. If you think about the next 10 years, where do you want to be positioned? How do you think about that?
Rob: I think we have the opportunity to be the top strategic investor across the enterprise, and so that's the vision. We certainly have a long way to go. I think what you've seen within Cisco so far is the evolution of the mandate that has allowed us a big degree of flexibility in terms of where we invest. I think the second part is now really establishing that unique value proposition.
We have a portfolio development team of almost 10 people that is really designed to plug our companies into what we think makes Cisco really special, which is our huge salesforce, our customer base, our go-to-market channel. So where you will see this going? In the future, I want to be more relevant to Seed and Series A deals. I also want to be able to write later stage checks.
We do a very good job around tracking innovation that is sort of those mid-stage opportunities. We're going to expand that so we're relevant across the entire ecosystem, and I think we've got a great opportunity to do it.
Jim: But surely there must be trade-offs with this approach. Can you be all things to all people?
Rob: Great question. I think that question is very relevant as many people think about how to set up their corporate venture arm. So one of the things that has made Cisco unique is, we have the same team responsible for acquisitions as is responsible for investments.
Karthik Subramanian, he was one of the Rising Stars in the reception last night, is a perfect example of that. So, he covers security for my team. As part of that, he led the acquisitions of OpenDNS and Cloudlock. He also drove our investments in Exabeam and Flashpoint.
And so for Cisco, who's also a huge acquirer, we've acquired 200 companies over our history, having that visibility into the market has driven us to do it out of the same organization. I think you really have to understand with the corporate venture effort, what's the end-goal. To us, the end-goal is having earlier visibility into companies that are going to shape the market for Cisco and our customers. We believe having that combined team puts us in the best position to do that. That may not be the same for other corporates.
Jim: That's really interesting. So, how do you think about in terms of, this idea that in some ways, spin-ins have been seen as a Cisco forte, which is kind of, you know, is it an investment, is it an acquisition? How does that then join up? Are there any good examples because I think for people in the crowd, it's a difficult thing to think of or conceptualize how to do that.
Rob: Sure, I really consider a spin-in is more of an acquisition tool than an investment tool. So over the 200 acquisitions we've done over our history, we've probably done half a dozen spin-ins in the last 10 years. So, it's a pretty complex structure. I think perhaps the more important thing is, just how investments influence our overall strategy.
We're not out there investing to acquire a company in the future, that's not our mandate, we're investing to be intelligent about where the market is going. And we often have the flexibility to be well ahead of where Cisco's businesses are today. So, if I look back in terms of the IoT space, I think perfect example, five, six years ago Cisco kind of pioneered what we called the Internet of Everything and we were a big evangelist for that.
At the same time, we were struggling to find real platforms of scale in that space. We decided to get very aggressive on the investment front to track that innovation. We were investors for five years before we made our first acquisition. The company we acquired, which Cisco didn't invest in was Jasper. I think that investment activity was really what helped us understand what we saw in Jasper, just how special it was and fast forward to today, Jasper's the foundational IoT business within Cisco. We're driving 1.5 million new devices on that platform every month. And so, investments really are a linkage to Cisco's overall strategy, and that's where I think it's had the biggest impact.
Jim: Great. So it sounds like, $150 million in investments. You do an acquisition every other week, it's pretty active. Is there any sense that the R&D team feels a bit left behind too? How does that internal innovation team if it feels everything's externally focused?
Rob: It's a great question. We talk about innovation at Cisco through five pillars, build, buy, partner, co-develop, and invest. So, it's really a multi-faceted approach. I think this balance that we have where Cisco is investing where our business units are today, in areas like data center and security, give us an ability to actually be seen as key partners to the business.
So, we really strive to be seen as key strategic partners to the business units while at the same time having the flexibility to bring in that outside-in view. Five years ago, I couldn't have told you that Cisco should be in the IT operations or application performance space. Last year was the biggest acquisition under Chuck's tenure, with a $3.7 billion acquisition in AppD.
So putting yourself in a position to see what that next trend is, even if it is a degree or two outside of where the businesses are, I think are just a fundamental part of how we approach things at Cisco.
Jim: Okay, that's great. You describe yourself as in 10 years, wanting to be the number one strategic investor in enterprise, but how do you think about that globally, because the U.S. has obviously been dominant. We've seen the rise of China. There's other activity. How do you think about that global perspective? How big is a team that you have for international?
Rob: Yeah. I think there's two components of that. One, innovation is global. I have about a 50-person team. A third of that team is outside of the U.S. in regions like Israel, China, Europe, across APJ, Singapore, India, Japan, and Australia. And so, we really have I think a global view in terms of innovation - and innovation differs by region.
You know, in Israel, I would say the opportunities we see are much closely tied to our core, in areas like security and in data center. Whereas when you move to a region like China, we're just starting to see activity move from what has predominantly been consumer now to the enterprise. We want to put ourselves in a position there just to see what innovation happens even if we don't necessarily know what the tie to Cisco may be on day one.
Jim: Yeah. Okay, that's great. But then presumably, it's a challenge to be globally based obviously in California, the center of attention is here. How do you think about in effect, corporate venture as a career? What do you do for those people? How long do they stay, and how do you think about the balance and diversity, which is core theme to the conference?
Rob: A great question. So, first, with regards to career opportunities. I think corporate development in general has been a good stepping stone both within the company as well as outside of the company. And so, that I think creates an attraction that allows us just to bring in talent to really further the mission.
So, if I look at some of the people that have gone on to lead business units and serve as executive members of Cisco, a lot of them came up through the corporate development organization. So that's sort of the Cisco path. At the same time, I think it's a great platform for folks that want to move into areas like investments, private equity, venture capital. So, we've had a great time bringing people into the organization. I think how you retain those are something that we have to get creative about.
Today we're looking at things such as, do we bring in some of the concepts that have made venture capital such a lucrative area, and in thinking about introducing things like carry into how we go about doing things. Now, that introduces a series of trade-offs that are also really difficult but it's something that we're at least considering as we think about being able to attract top talent going forward.
Jim: Yeah. I suppose the attraction from being inside California and thinking, "I've got a career within Cisco, maybe being in regional satellite office, where the attraction for maybe going more independent is there almost a different structure required for those people, in terms of carry versus domestically, I don't know.
Rob: I think you have to be willing to look at all types of models. And if I look at where a model is today compared to where it was 18 years ago when I came into Cisco, we've gone through two or three evolutions, and I don't think that's going to stop happening. I also want to touch on your diversity piece, because I do think that's important. From a Cisco standpoint, what we're trying to do at the end of the day with investments in M&A is help Cisco get into an area that maybe left to its own, it wouldn't have arrived to. And what that is really about is, it's about bringing different perspectives to bear as we think about market disruptions.
I think the biggest way to do that is making sure you have a diverse set of experiences that you bring into that point of view. If I look around my team and everybody is like Rob Salvagno, and they're an ex-investment banker with an Econ major, then we're probably going to all look at the market opportunity in the same way. But if you look across my team today that diversity spans gender, race, job experiences. And I think that just helps us be better in terms of how we look at things. And we've extended that to our investment philosophy as well.
There was recently an article about our LP commitment into Aspect Ventures, and people talking about that as a diversity item. We're excited about Aspect because we think their approach is actually going to be differentiated, and we think that's going to give us access to opportunities that we wouldn't have had access to. That was the primary reason why we invested and we think that's an important part of our differentiation going forward.
Jim: Great to hear Rob, thank you. And then you mentioned obviously the LP relationship. Obviously, a lot of people think about, okay, how do we invest directly? What's the connection? How do you work with VCs? So, the LP commitment obviously you were first LP and biggest in SAFE in China. You've got this global experience, how does that connect up now? What are the changes you're seeing in terms of venture approaches to you?
Rob: Yeah, it's a great question. LP positions for us have been a way that we sort of expand our investment footprint as well as a way that we test ourselves into new markets. So, today Cisco has LP positions in about 40 funds. We often use that on a regional basis to get into countries where maybe I don't have a team member.
Perfect example about five, six years ago we thought Brazil may be, the next market. I didn't have a team member there but we did find one or two local funds that we trusted. That became our first entry into the Brazilian market. Now, if the market itself begins to pick up, if Cisco's more committed there, that may drive us to a position of saying, "Well, let's put a dedicated resource. Let's look at making direct investments." And then of course that spectrum continues to be in a position with the team where maybe we'd be willing to do JVs, acquisitions and all the complicated structures that you see here in the U.S. or in regions like China that have really matured from that standpoint.
Jim: But are you finding the VCs approaching you differently? There’s a lot of talk maybe five, six years ago, VCs viewed fundamentally money, be passive investors, LP only. You’re just acquiring a portfolio, the company is saying, “Don’t do anything more than that.” But I get a sense that there’s a sea change going on, and they’re saying, “Hey, you can add value to our investment decision-making as well as maybe buying a portfolio company.” Are you finding that they’re coming to you with new or different ideas.
Rob: Yeah, that's a great question. I think on one side obviously corporates get some negatives against them in terms of their agility or their true value-add. And I think that comes down to, you do have to believe in your value proposition. But to step back for a second, if you look at how we've approached our relationships with VCs, we're often co-investing. So we typically don't lead rounds. That means that we can often complement the Sequoias, the Lightspeeds, the Norwests of the world. And from that standpoint, I don't think they feel we're competing for ownership from that perspective.
At the same time, if you believe our value proposition which is really built around enabling our portfolio companies to tap into the go-to-market, the customers, the channel that we've created, I think we can bring something to our portfolio companies that no financial VC can actually equal. And so, from that standpoint, it's both complementary but also differentiated.
Jim: I will take the opportunity to give a quick shout out to Fernando and APACs Brazil. We’ve been partnering with them for three or four years. And I've interviewed one of your colleagues down there in Sao Paulo, and she was talking about the Redpoint event. She's in that collaboration with Fernando and it was really inspiring to see. But at that approach to the local market. So, I don't know if Fernando is in the room, but Robert, but... Anyway, you'll catch him up. So just finally then I suppose as we sort of look to wrap up, have you any sort of pain-points, anything that you're particular working on, that given in regards of 650 people, 350 corporations, $6 trillion of aggregates annual revenue from the corporations attending, it's a big globe. What are you working on? Any requests you could ask from the audience that they could help you on?
Rob: Maybe some lessons learned for people that are at the beginning of how they would put a CVC in place. And we've been out there for more than two decades doing this. I think it first starts with the mandate. So, are you trying to drive particular relationships with companies that are really close to your business? And so, that's a very close investment strategy with your business units, or are you trying to track innovation that maybe a couple of horizons outside? Those are two different philosophies. I think you need to be clear about that internally, and then be clear about that externally.
Testing commitments, you go back 5 years ago, there's less than $10 billion being put to work annually by corporates. I think this year will be north of $25 billion. And so, being committed for the long-term in bad markets, in good markets is I think also critical.
The last piece is the unique value proposition. There's a lot of money out there. What's going to differentiate you? The approach that we took at Cisco was, let's not have to create that unique value proposition, let's look at what makes Cisco unique and tap into that so that we can offer that to our portfolio companies. I can't go out and create Cisco's direct Salesforce or our channel, but if I can find a way to plug the Cohesitys of the world, the Kesprys of the world into that, then I can bring a level of scale that's pretty unrivaled by not only financial investors but also most corporates.
And so, what is that unique value proposition? And is it built around what makes your company special?
About Rob Salvagno:
Rob leads the Corporate Development team at Cisco and is responsible for driving Cisco’s M&A and Corporate Venture Capital activity. A veteran of Cisco’s Corporate Development organization, Rob has executed dozens of acquisitions and investments, constructed its major spin-ins such as Nuova and Insieme and helped launch new innovation projects within Cisco.
About Jim Mawson:
Jim is the Founder and Editor-in-Chief for Global Corporate Venturing, Global University Venturing and Global Government Venturing, three trade titles providing news and date on how companies, governments and higher research institutes can support and invest in entrepreneurial third-parties and their internal start-ups.