Accelerating Impact from Strategic Partnerships to Policy Entrepreneurship

Where are we at?

How to accelerate innovation nationally

How to engage the world.

Four Approaches to Open Innovation in Korea

Open innovation in Korea is slowly moving away from building R&D capacities to reassessing business and operational models by either building its own corporate venture capital arm or working with an external consulting partner (typically a VC or an accelerator). The purpose for most Korean companies would mainly to have a testbed in innovating its business model or developing new technologies. And by running the open innovation program, the respective company would update its biz model, secure new talent, tech, market insight, and approaches to customer acquisition, etc.

Of course, a company may decide to buy a well-oiled startup with the range of technologies the company would need. For instance Hanwha Systems recently bought Satrec Initiative and plans to equip itself with the nut sand bolts to launch its own satellite.

In Korea, open innovation really used to be investing in a company one by one or expanding its social impact footprint and its CSR program, e.g., Hyundai Car’s pitch program called H-On Dream, but it is now opening up to a much more open collaborative approach. 

  1. Digital Transformation with a consulting firm: One of the most well-known open innovation consulting firm is called 로아 인벤션랩. Its most successful case studies are with KT 국민은행 and working with fashion & cosmetic brand companies that were relatively slow to innovate, e.g., LF and 신세계. Side note: It also began investing in startups, ~20 last year, via an angel-based VC, Big Bang Angels.
  2. MOU-based with VC/Accelerator: A large startup/accelerator/VC signs a partnership with a corporation to reassess its business model. The example I witnessed was the one with Hashed, a blockchain fund in Korea. It worked with an array of companies, banks, LG CNS, and those even remotely interested in learning about blockchain, including SM entertainment and CTIA, a mobile telecom company. And in doing so, the corporation’s tech or new business department could pilot a business model and the VC funneled its startups to partner with large corporations.
  3. CVC: The corporation could also decide to build its a raw datasheet of startups by opening a “신사업” or new business branch in industries it already does business in.The most successful ones I’ve seen are Kakao Ventures and Samsung Next. Most Korean CVCs do not have a very strong international base, except for the Korean conglomerates that already have a presence abroad. 한화생명’s Dream plus 63 has secured a network in Tokyo and Shanghai. Even Smart Study famous for its animation and its song, baby shark, has hired one or two investment analysts to review startups that they could be a part of. And it was quite successful at it so far. The interested company could soft-land by participating in one of KITA Next Rise’s programs as a judge/mentor. 
  4. Introduction-based: KITA has done this really quite well. KITA is the parent company that owns the space in Coex Mall and has a free lounge for startups. Annually, it hosts an annual conference called Next RIse for the purpose of assisting with open innovation. Another program KITA is famous for is a program called Fortune 500 Connect. KITA hosts an open invitation for startups interested in working with conglomerate contacts, notably BMW and Chanel, in the States, etc., to make introductions. 

Open innovation may seem tricky to enter, but there are many new mediums in which the startup could enter the field of open innovation. I suggest all those who are interested to start attending the startup-corporate meet-ups and or read case studies of successful programs or acquisition models.

How to Grow Your Overseas Branch into $600 M in Net Profit

South Korea has historically been reliant on foreign suppliers for the core technologies. Many of its advanced weapons systems are based on technologies developed outside South Korea.

To mitigate the dependence and facilitate the technological development of the defense sector the commercial R&D activities carried out by the state are increasingly being outsourced to the defense industries.

One way to bring in foreign technologies into the defense industrial ecosystem is to work with local partners, suppliers, trading companies, and manufacturers that already have a contract with the ADD (Agency for Defense and Development.)

You’ll also need to get through the International Traffic in Arms Regulations. I’ll have a follow-on post about ITAR.

Here are five ways to enter the Korean market:

  1. Work through a trading company. This method is used when the foreign entity is not interested in establishing an entity in Korea, but in testing out the market. A contract is drawn between the company sourcing the product and a domestic import/export partner. The trading company in the deal receives an estimate from the supplier, sign a sourcing agreement with clients, and receives a set fee. Then they work with domestic partners, customers of the product, and negotiate ($/unit, etc.)
  2. License out the technology. Licensing or outbound licensing is essentially selling the intellectual property of the technology to commercialize the IP into the business. This is useful if the supplier lacks market knowledge, infrastructure, and resources to bring the product to market without the related R&D costs. The key here is to set reasonable and nondiscriminatory terms to avoid the likelihood of future IP litigation.
  3. Set-up its own branch here in Korea. At Big Bang Angels, I worked on a fund model to help U.S. and Canadian tough-tech startups with IP protection but without access to the market, network, and investors, to make inroads into Asia. The thesis was that the startup could secure IP protection in the international finance hub of Asia, Singapore, or Hong Kong, to attract follow-on capital on the specific technology. Then form a team agile enough to navigate the Asian market. Risky, but an appealing method for startups, especially AI or SaaS companies, for its agility.
  4. Partner with a local manufacturer or supplier that could establish itself as a sales partner on the ground. This could be a one-stop-shop solution to localize the production of the technology. They can ideally deliver on the technical capabilities, integrate the product into the niche needs, and utilize the sales channel to get the product into the market.
  5. Form a joint venture. It’s an agreement between two companies with different areas of expertise in the creation of the new, separate business entity. By sharing the risk, revenue, and technical know-how of two business entities, they can enter the market much more effectively.

Forming a joint venture is a common method to set-up an entity in Korea between two companies from two countries. They share different cultural capital, market know-how, and through the JV, they share their areas of expertise in the creation of the new, separate business entity.

I recently had a conversation with a family member who grew a joint venture, or a business entity created by two or more parties with shared ownership, into a ~$690 million USD figure business in Korea.

Vacuum pumps used to remove air, gas, or oil particles from a device or equipment that can corrode the internal parts of a machine. It is used for various industrial applications in manufacturing units for optimal processing environments such as semiconducting materials, glass coating, etc. They are used even in medical applications that require suction.

In the beginning, he received an offer from the company to set-up a venture here in Korea with around 15% or so market share. When he began his business, he found that machinery malfunctions. The problem was that the company knew how to sell, not to engineer.

The Korea office would field complaint calls about tech malfunctions. Even if the specific equipment is around $50K or $100K USD per unit and the technology it supports is $10 Mns USD, it will not operate if the supporting tech does not work.

When he found the issue in the supply chain, the company did not have the capacity to fix the equipment but just to carry it into the country. And instead of delaying the issue, he created a study program for engineering students. In turn, they would help troubleshoot the mechanics.

The slogan became — “Fix First, Fighting Later.” As in, fix the equipment before they make the sales. They created a one-stop-shop to smooth out the process inventory to procurement. Competitors did not.

Eventually, the company sustained its customers and slowly increased its market share. The most popular use for the vacuum pump was in suppliers of semiconductors and flash memory chips. They began receiving offers investments from the parent company and the client companies like SK Hynix and Samsung Electronics, the South Korean memory chip powerhouse. It built its own facility to manufacture the pumps then exporting it from overseas and hired electrical engineers and field engineers. Engineering support was no longer a simple value-add, but its main competitive advantage to help design and set-up the system from ground zero.

There certainly many elements to the equation — the careful maneuvering of relationship management in penetrating the market, the internal R&D to continue improving the deployment systems piling on its many IPs, and others. But what gave the company the kick it needed to get off the ground was resetting priorities, creating another value-proposition, and building it into a core asset in the company.

Physics of the Future: How Science Will Shape Human Destiny and Our Daily Lives by the Year 2100

Physics of the Future is one of Michio Kaku’s earlier books of his series of his forecasts of the future. I really enjoyed this book – as he dissects each industry into each layers, he goes in depth into each industry with a rules as a physicist under fundamental laws of physics. As he begins the book, he warns the readers – everything we will read about are projections are the future.

The storyboards he envisions is quite extraordinary. From his own experiences and from the tech evolution he witnesses, he shows us the economic and physical possibilities of the future, for instance, how room temperature semiconductors can enable flying cars. He does explain the tech limitations as he goes into each sector, but I did wish he went into the unintended consequences of each tech today.

Instead of writing about how robots might gain consciousness some day, I wished he could write more about issues we are currently facing, such as the AI’s flawed algorithm giving us biased results. Data trust and privacy issues.

This book takes you on quite a journey. There is energy and enthusiasm radiating from the book as a quantum physicist in the future that he sees. I am certainly looking forward to reading his other books.

Disaster Security: Using Intelligence and Military Planning for Energy and Environmental Risks

This is a book recommended by a close friend who is also a climate scientist. Chad Briggs and Miriam Matejova takes the audience interested in scenarios, simulations, and disaster planning through different exercises developed under the umbrella of the US Department of Energy and the US Air Force.

Militaries often use war games and simulation exercises for scenario planning. These exercises can be very applicable for energy and environmental security scenarios as well. These scenarios present different security challenges and their potential cascading impacts on global systems – from the melting of glaciers in the Andes to hurricanes in New York and Hawaii, and on to hybrid disasters, cyberoperations and geoengineering can carry very high risks.

The authors emphasize the very “human” element to tackling climate change and that the records and historical accounts and modeling are no longer paint a complete picture. Although this is a rather new approach, it has a close overview of the lessons and solutions to the world’s pressing energy and environmental security challenges.

“We wanted to emphasize that it’s not just about climate change. That’s a really important factor but it’s there in the background. Human actions as well are really important. These aren’t just natural disasters; these depend upon human actions and human vulnerabilities”

Some of the lessons learned were really interesting. He notes, local knowledge is far superior to the technical and published reports or effective strategies to cover for institutional blind spots in training.

In today’s networked world, environmental disasters are becoming more likely with the traditional notions of hard security becoming increasingly challenged. I thought this book was quite enlightening and a good one to have in the toolbox – for partnership practitioners – it is increasingly important to be ready to be ready for the unpredictable and extreme – to be aware of the vulnerable and complexities and to be flexible in thought – whether they be disasters or climate adaptations.

Protecting Our Country from Up Above: Updating the Satellite Imagery

So I was at an event by Peacetech Labs when I ran into then Senior Advisor at the Bureau of Arms Control, Verification, and Compliance. We ended up having a much longer conversation about a whole lot of things – quantum computing, innovation at State, and how folks sometimes did not even know how to use excel.

He was a visionary – dare I say – a rare kind at State. We became quite good friends. I was at the Office of Consular Affairs at the time, working on outreach and tech management. I specifically also managed the content, apps, and the ESRI map on the travel.state.gov.

So on the current website, the goal of Arms control is to “build cooperation among allies and partners in order to control the threat posed by weapons of mass destruction, their means of delivery, space and cyber capabilities, and conventional weapons…AVC is committed to working intensively for the development of strategic engagement for international security, partnering with U.S. allies and other agencies in fielding missile-defense capabilities for international missile defense cooperation, and promoting U.S. security in outer space.”

What this means is – that when the Secretary or the President shakes hand with Kim Jong-Un to dismantle nuclear missiles, this office is the one to verify dismantlement. Verified dismantlement in a nutshell is to obtain high confidence that the program no longer exists and that reconstitution will be difficult and likely to be detected relatively quickly or at least long before significant quantities of banned items are produced. In this sense, the dismantlement is called irreversible. 

Previous to my time, there was an Entrepreneur in Residence at AVC who had worked to bridge programs with tech vendors and embassies. He mentioned how satellite technologies had not been updated since the 60s.

Satellite images are a product of remote sensing. Remote sensing is a technology for sampling radiation and force fields to acquire and interpret geospatial data. Geospatial data are used to develop information about features, objects, and classes on earth’s land surface, oceans, and atmosphere. Remote-sensing exists today as an extremely sophisticated form of space photography which has developed in the last few decades.

It is crucial to begin monitoring from the early stages of detection from development, production, testing, or storage of non-conventional weapons. It can take a long time to verify the conditions set out in the treaties are satisfied.

The spread of nuclear weapons technology consist of a rainbow of decentralized, sometimes overlapping and sometimes fragmented systems of international agreements, informal arrangements, and national legislations. Not surprisingly, differences in national implementation and enforcement continue to frustrate efforts to keep dual-use goods and technologies out of proliferator hands. These implementation gaps, coupled with the sheer volume of global trade and commerce, have reduced the barriers to entry for intermediaries and created pathways for illicit procurement networks to exploit. 

While the weight of that demand is heavy on any verification system, the certain consequences of failure require no less. To that end, we will have to close disparities between treaty compliance and the existing verification means available to serve that function. Otherwise, the imbalance will continually jeopardize the shared nonproliferation and disarmament aspirations of this century. Strengthening verification standards and practice through modern technology will ultimately strengthen transparency and security inherent in the verification model and renew commitment to compliance. It will then serve not only as a catalyst to future agreement, but also enhance the certainty that those security challenges that nations choose to meet by agreement will not be illusory. 

How Venture Capital Impacts Defense: Conversation with Peter Thiel and Josh Wolfe

Harnessing and Securing American Innovation: How Venture Capital Impacts Defense

Josh Wolf is a co-founder of Lux Capital to “support scientists and entrepreneurs who pursue counter-conventional solutions to the most vexing puzzles of our time in order to lead us into a brighter future. The more ambitious the project, the better—like, say, creating matter from light.” Peter Thiel is a co-founder of PayPal, Palantir Technologies and Founders Fund. Plantir is an In-Q-Tel and Founder’s Fund-backed company.

Peter: By my count, there are only two companies that have been started since The Cold War, that are (1) focused on national security, and (2) have reached a billion-dollar valuation: SpaceX and Palantir. [4:00]

Peter: A lot of innovation gets driven by smaller companies. This is absolutely critical. When not many people are doing it— if you are one of the few who do it— there is a lot of opportunity. [4:25]

Josh: Strength comes in part from technological dominance. Technological dominance comes from brilliant engineers that are inventing cutting edge technologies. [6:20] 

Josh: Palmer Luckey, Trae Stephens, and Brian Schimpf [founders of Anduril Industries] are authentic engineers that are obsessed with technology. 

They are constantly thinking about: 

What does the warfighter need? 
Where is the white space? 
Where is the gap? 
What is China developing? 
What is Russia developing?
How can we put them [US warfighters] with the most cutting edge technologies out there?[6:35]

Josh: Many of these people [those inventing new technology] were inspired by Science Fiction. They are literally going back— 20 years into the annals of comic books and sci-fi movies— and saying it would be amazing if we had that. [7:00] 

Peter: If you can’t create a business that is worth a billion or more the venture capital model does not work that well. If you start a company that is worth $30 or $100 million that can be quite successful for the person who started that company. For a venture fund if that is the best we did we would be out of business. [9:40]

Have Palantir and SpaceX created a template for other startups to follow with the defense space? [Peter]: Well there is certainly proof that it can be done. In both cases, it took a wickedly long time. Close to a decade to start getting significant contracts from the US Military. In some ways, they were not conventionally venture fundable. [10:20] 

Josh: It helps to reduce market risk. You will have a lot of venture capitalists that say you are focused on the defense industry. The stereotypes of the defense industry are that the defense industry is slow-moving, bureaucratic, very political, they might not pick the best technology, they might instead give the contract the company they have been working with for the past 20 years, etc…So whatever you can do to eliminate that risk [is good]. [If not] It is like we are fighting with ourselves by not equipping the warfighters with the absolute best technology that is coming from some of these early companies. [14:30] 

Josh: The origins of Silicon Valley were in electronic warfare and defense. There is an aversion for people to want to work on defense-related things. That is a zeitgeist that is growing. [21:30]

Josh: I think there is a job society can do —and that is the retelling of a narrative that can galvanize some of the best and brightest to work on American defense. [23:10]

Peter: There is always this danger for a tech company to become overly bureaucratized. [29:49]

Josh: The one real edge you can have as an investor is a behavioral advantage. For us [at Lux Capital] that means having a longer time horizon than the average investor. We call this time arbitrage. If the average investor is looking for a signal of success in a year or two— and we are looking at something that might not give us a signal for 4 or 5 years —then by definition there will be fewer investors looking to fund what we are funding. 

The valuations will be lower— and if we are right —the returns for us and our investors will be higher. So we like to look at things that are further out which means they are riskier and more improbable to work. But when they do they work in a really big way. [30:46] 

A Chat with Team8, a VC from the Israeli Intelligence Unit

I was fortunate to tune into a conversation with Liran Grinberg the Managing Partner of Team8 Capital, a global cybersecurity VC. He founded Team 8 in 2014 with the former Head of Israeli intelligence unit, 8200, Nadav Zafrir.

Team8’s company-building Foundry model de-risk process to venture investing, which is a process of “co-founding and serial-investing.” This led to serial investing into enterprises such as the creation of Sygnia ($250M exit with x60 return in 3 years) and Claroty, the world’s leader in Industrial Cybersecurity, backed by Rockwell AutomationSiemensSchneider ElectricGeneral MotorsBMW Group and more.

Here are three main advantages to having 8200 as the backbone of Team8.

So what is Unit 8200, and how does it contribute to the success of Team8 Capital?

  1. Level of talent is high. In Israel there is a mandatory service, and Unit 8200 is an elite military Israeli unit. The Team 8 leadership had access to the 1% of the 1%, those who had can new companies or can help build new companies. They were security entrepreneurs, cyber operating partners, and top talent from the largest unit within the military.
  2. Training is high. They start practicing leadership at a young age in the military and in technology. Under Team 8, under the Cyber and Data division, they build products and services to protect from cyber threats for data at scale.
  3. Culture is failure-tolerant and bottom-up. As 18, 19 year olds, they military entrants have their first year, second and third year to experiment with their new ideas each year. The graduates of the 8200 naturally fuel the tech ecosystem and the “startup nation.” 

Another really interesting aspect to the model of Team8 was the venture-building model and the formation of the “Team8 Village,” a critical mass of mass of talent through which a platform- they built out a process for entrepreneurs, engineers, and the investors.

Instead of focusing on commercial innovation, Team8 geared attention to the VC world and the intersection of academia, inventions, and startups and how to enable the backbone of startups to be more influential. As incumbents, enterprises have a lot of resources and access to the markets like understanding of the customers, they are bureaucratic and it is hard for them to innovate. Startups solve very concrete problems. They don’t have much resources or any research capability, and the success rate is very low. So Team8 chose to ask –  how can VCs act as a platform to solve difficult questions?

Team8 helps enterprises digitally transform. The companies or LPs become strategic investors.They don’t often have the muscle power to build something from scratch. So therefore, they passively help build the model to impact the type of problem to invest in the company.

For a gate of four hours, Team8 brings a challenge and companies together with engineers and the leadership. They bring together companies without lack the technical domain expertise from different geographies with a similar problem. For instance, they brought together data scientists and enterprises that 2 entrepreneurs usually would do in the garage. Team8 then conducts technical due diligence to help them grow.

If the problem is big enough, they build the company from scratch. They have 12 companies so far. This whole model – the platform team, village, the process – the investors, and everyone – has de-risked the investing process. 

Liran began working closely with founding teams on the ideation of Team8’s first companies, including Sygnia which was acquired by Temasek for $250M, and Claroty which is backed with $100M in funding, alongside Illusive Networks, Hysolate, Curv and more. Liran then transitioned to build and lead Team8’s Go-to-Market Group across its marketing, business development and market research functions, alongside the formation of a tightknit community of hundreds of C-level executives from the world’s leading enterprises. Combined, the two initiatives have become a powerful and differentiated advantage of Team8 in accelerating the success of its portfolio companies. 

His venture-building model with Israeli’s top talent is not only tackling the world’s greatest cyber security challenges, but also the backbone of the startup nation Israel is today.

Accelerating Tech for a Secure and Sustainable Future

When you think of working in the defense industry, you are right think about the arms – the military equipment, missiles, submarines, helicopters, etc. You’re quite right. So what it mean to be working in sustainable solutions in the world of defense tech?

The idea of working with the private sector for public applications is not new. In the past, most predominant forms of spending were through governmental entities such as DARPA  as R&D directorate and for weapons and military development – the Central Intelligence Agency’s publicly funded venture capital firm – In-Q-Tel or the Defense Innovation Unit.

Their sponsored research today became the technologies in our daily lives – the GPS, the Internet, the microwave, artificial intelligence, were all products from the State investments in technology.

Emerging technologies today have far outpaced the contracting model, where it now needs to move towards venture financing. The types of threats we are facing today including cyber – are outside the security contractor supply chain. The existing model’s ability to keep pace in future warfare is questionable.

The world of defense tech is an interesting one, where it extends beyond the traditional arms to encompass artificial intelligence (AI), quantum computers, cyber, robot, 5G (5th generation), urban air mobility (drones) mobile communication, and aerospace technologies.

At the current Center, we build a hub of: a) challenging technical problems; b) globally shared security challenges c) the intersection of commercial and public sectors, and d) with significant economic upside. We seek to work with venture capitalists accelerating dual-use early-stage technologies by facilitating technology transfer, and forming strategic alliances. 

We work with a network of highly vetted global advisors and partners, enabling us to map technologies to globally shared security challenges. We base our selection on performance, application of technologies to our partner’s mission capacities, and on complete alignment of interest. 

So how can defense tech serve as means for sustainability?

Aerospace and automobiles both rely on high technologies but are both major manufacturing industries relying on advanced materials, electronics, embedded systems, mechanical components, engines, and structures.

The basic idea is the same – you invest into new technologies that are more efficient, faster, smarter but to invest into clean technologies doesn’t also release toxic chemicals or with greater mitigation mechanisms to control GHG emissions.

The battery-powered electric airplanes are, believe it or not, already here. By investing into dual-use (commercial and public) technologies, clean technologies in the commercial sector could be bolstered with public sector investments. Through partnerships and their collaboration with domestic and foreign defense conglomerates, we can accelerate the progress of companies making a material difference in carbon emissions through increased incentives.

The vision is to invest into technologies to help advance the capabilities of the defense sector to have advanced technologies and to develop technologies that will enable the industry to shift from nonrenewable to renewable resources for energy and materials in a significant way – and thus will help to achieve a secure and sustainable future.