Ep. 271 – Selina Troesch Munster, Principal at Touchdown Ventures on Corporate Venture Capital & DEI

Ep. 271 – Selina Troesch Munster, Principal at Touchdown Ventures on Corporate Venture Capital & DEI

On this week’s episode of Inside Outside Innovation, we sit down with Selina Troesch Munster, Principal at Touchdown Ventures. Selena and I talk about the changing opportunities in corporate venture capital, both for corporates and startups, as well as the impact in the growing focus of diversity, equity, inclusion, and how it’s impacting the industry. Let’s get started.

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Interview Transcript with Selina Troesch Munster, Principal at Touchdown Ventures

Selina Troesch Munster, Principal at Touchdown VenturesBrian Ardinger: Welcome to another episode of Inside Outside Innovation. I’m your host, Brian Ardinger. And as always, we have another amazing guest. Today we have Selina Troesch Munster. She is the Principal at Touchdown Ventures. Welcome back to the show Selina.

Selina Troesch Munster: Thank you. It’s great to be here.

Brian Ardinger: I’m excited to have you back. You were out in Nebraska in 2019. You spoke at our Inside Outside Innovation Summit. And so, I’m super excited to reconnect after COVID to see what’s going on in the world of corporate venture.

Selina Troesch Munster: Yeah, it’s such a shame that COVID ended in person events because that was such a fun event. And I encourage anybody listening to definitely get out there the next time it happens in person. It was fantastic. And I have relationships from that week that are still very fruitful.

Selina Troesch Munster, Principal at Touchdown VenturesBrian Ardinger: That’s awesome. Oh, I’ll give a little bit of background to our audience members who may not have seen you there or heard more about you. But you started at Touchdown Ventures, I think in 2014 or so when it first got off the ground. Before that you were at Barclays in New York. You’re currently an Adjunct Professor at USC teaching Venture Capital at the MBA school there. And then also just were named a Global Corporate Venturing Rising Star in 2020. So, congrats on that as well.

Selina Troesch Munster: Thank you. Yeah, that’s so accurate.

Brian Ardinger: For those who aren’t familiar with Touchdown Ventures, it’s a corporate venture as a service almost type of company. So, let’s talk a little bit about what is Touchdown Ventures and how does it fit into this corporate venture environment?

Selina Troesch Munster: Yes, absolutely. So, Touchdown works with corporations to help them manage their venture capital programs. And what that means in practice is most corporations either don’t have the appetite or ability to hire experienced VCs to run a program internally.

So, what our co-founders decided to do was to create a service-based business where experienced VCs, work together with folks internally at the corporations to develop a strategy for, and then actually manage, these corporate venture programs. And the opportunity that David, Rich and Scott saw back in 2014, when they founded the business, was corporations have so much to provide to startups in you know, having a relationship with them. In addition to the capital that they deploy.

But often they don’t have the skill set necessary to identify which of those startups are a good investment opportunity. And then to manage those investments through to an exit, whatever that may be. Which is what we know how to do. We, on the other hand, don’t have the expertise in the internal politics and priorities within that organization.

And so, by marrying together, our financial analysis and, you know, opportunity evaluation skills, and then deal management skills, and their knowledge of what’s impactful for their business, we have a really powerful way of making investments in startups. That as some of our corporate partners say, give them a bit of a leg up against their competitors based on that relationship.

We work together with I believe 18 different corporations, as of right now, managing their funds. Each one is developed specifically for that corporation’s goals and objectives and risk tolerance. And, you know, we have a dedicated team to manage each one of those specifically.

And so, we run programs across a variety of different industries and have made, I think almost 70 investments at this point across all those programs. Pretty awesome growth from where we were in 2014.

Brian Ardinger: When you think about corporate venture, it’s somewhat new to the field of venture capital. I mean started probably with Intel. I think they were one of the first corporate venture funds to come on the scene.

But you’re seeing more and more companies look to startups and look to corporate venture capital as a way to either differentiate their Innovation efforts or have access to different things that they wouldn’t have before. What do you think is driving corporates to taking a look at venture capital as a means to meet their goals?

Selina Troesch Munster: I think there are a couple of drivers. One is the increasing rate of company formation and, you know, to use an overused word disruption within traditional industries. And so having the foresight that venture capital gives you of, oh my gosh, I just saw 10 companies that raised funding in a particular space. That gives you an idea of where the market might be moving toward and what a corporation needs to be aware of in terms of what might be coming their way and trying to eat their lunch in the future.

And so, you know, even if we don’t make that many investments over the course of a year, we still interacted with hundreds of startups and started to see what’s happening out in the market. And that intelligence is a really important part of a corporate venture program, is you don’t have to say yes to an opportunity to learn from it.

The other thing that I think is driving it is that there is a lot of capital out there funding a lot of different types of businesses that haven’t traditionally been venture backed. And so, we see it in the food space. That is a relatively new sector for investment for venture capitalists.

You know, traditionally you’re talking about software. That’s pretty much it. And so, when you have VC money flowing into these sectors that are non-traditional VC sectors, you have a greater volume of threats to those businesses as well. And having that function where you get to have a much tighter relationship with some of these upstarts is really valuable to the corporate strategy team and really the business units.

There are also certain types of partnerships that just don’t happen without capital investment. Startups are recognizing that they can leverage the capital raise process to also get really tight, great relationships with corporate partners in that way.

Brian Ardinger: A lot of corporates out there, they do invest in the venture space, but they do it primarily just investing in other funds and that. So, are you seeing more and more companies wanting to take more of that hands-on approach? Not only just investing for ROI return, but investing in Touchdown Ventures and what you can bring to the table to give them that more hands-on insights and looks, in addition to just the ROI traditional financial model around it?

Selina Troesch Munster: Yeah, I think that that’s a big driver of what’s helped our business grow, but also what’s driven corporate venture funding to new highs over the past couple of years. And I think we’ve had a record year in corporations putting money into startups in 2020 and probably 2021 as well. How things are trending.

And I think it is because of the desire for that direct relationship with the startup. It’s something that we, as Touchdown enable because we’re in the trenches with the teams at the corporations, talking through every opportunity that we see and figuring out which ones are good investment opportunities, as well as sort of strategic partnerships.

And I think having fund investments also has a place within a portfolio approach for corporations. But the ownership of the program is really important to a lot of these folks because they want to see firsthand, who are these companies? What are they doing and how do we most productively create sort of mutual benefit between ourselves and the startup ecosystem? And that can be a little bit harder when you’re invested in a fund and you’re not necessarily seeing all of the deal flow.

Ewing Marion Kauffman Foundation

Sponsor Voice: The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation based in Kansas City, Missouri, that seeks to build inclusive prosperity through a prepared workforce and entrepreneur-focused economic development. The Foundation uses its $3 billion in assets to change conditions, address root causes, and break down systemic barriers so that all people – regardless of race, gender, or geography – have the opportunity to achieve economic stability, mobility, and prosperity. For more  information, visit www.kauffman.org and connect with us at www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.

The Ewing Marion Kauffman Foundation

Brian Ardinger: Are you spending more time working with the startups and sourcing startups, or are you spending a lot of time with the corporate folks trying to understand what their needs are? Is it 50/50? Walk me through the process of how you actually work with a corporate and a startup to make that match.

Selina Troesch Munster: It’s definitely a blend and with a team of three, for instance, on the fund that I’m working on, we split those responsibilities. And some days I spend more time with startups and some days I spend more time with their corporate partner. But both are really critical to being able to find those matches.

And so, we spend, a fair amount of our week, having conversations with folks within the business units to understand, you know, what are your strategic priorities? What are the business problems that you’re trying to solve? What are you trying to build internally so that we don’t show up with competitors, what you’re trying to do with your own R and D, but where are there places where you might want to accelerate what you’re doing with an external partner?

And based on that information, we will go have conversations with startups and say, all right, how well does this match up against what this person told us? Is this enough of a priority for them to spend the time to talk to this company?

We manage both the funnel of investment opportunities, but also funnel of commercial opportunities where we say, all right, you know, every quarter we will come back to this person in R and D and say, hey, we talked about this last time. This is on your wish list of like, wouldn’t it be cool if we could find companies that do this? These are the opportunities that we’ve identified. Let’s talk about how they do and don’t match up.

And if there’s anything that’s sort of serendipitously really aligns, let’s make sure that you were able to have a conversation and sort of take that the next steps beyond that first introduction. But it really is on both fronts that we’re also figuring out what the startups care about. You know, I wouldn’t want to bring a startup in and say, well, our partner is really interested in doing this with you and they’re like, we would never consider that. So, there’s, you know, a little bit of a needs assessment on both sides.

Brian Ardinger: So, you’re doing both the strategic investment and companies are buying equity in those particular companies as part of a fundraise. But it sounds like you’re also doing some basically strategic matchmaking from a customer perspective. So, startups are coming to you and saying hey, we’d love to work with XYZ company, or are you a relationship with these? We’d be a good fit for providing services into that corporation. Is that a blend of what’s going on as well, or?

Selina Troesch Munster: Yep. Absolutely. And usually our conversations with startups are, look, you may not be fundraising right now, but there are other opportunities that we can facilitate for you. If we have an understanding of your business and an understanding of what you’re looking to do with potential partners. That often gets us into conversations with companies kind of in between their formal fundraises as well, because we do have that added benefit of being able to facilitate commercial conversations.

Brian Ardinger: So, you sit in between to a large extent for both the corporates and the startups. What are some of the key, I guess, problems or challenges that you would recommend for both the corporate and the startup to avoid when trying to make these relationships work?

Selina Troesch Munster: I think corporates can be really scary to startups. I think that there are often legal requirements or legal agreements that the corporate wants to enter into that just look like a lot of work from the startup perspective. And look like risk from the startup perspective. And so, for corporations, I would say, keep it relatively simple on the legal side.

Make sure that whatever you send over to a startup company in terms of, you know, whether it’s an NDA or a side letter or, you know, commercial agreement that it’s not the same thing that you would send to, you know, a bigger supplier or customer. So that’s one.

On the other side, I think startups often, rightly, but often see themselves as having so many different opportunities to help their customers or partners. And, if you show up with, like, I can be all things to all people, you’re requiring a certain amount of imagination and thinking about what to do with your product, from someone who might have a day job, that they’re very very focused on and doesn’t have time to think creatively about where you might fit in.

And so, the more specific a startup can be coming in saying, look, this is what we do. This is the opportunity we see with you. And this is how we would propose to work together. The easier it is for that person to say, yes, that’s awesome. I definitely want to do that with you or, you know what, that’s not quite what I want to do. I would tweak it in this way. Like, let’s move forward. Or this isn’t right for us. So, it gets you to an answer a lot faster, and it also takes some of the burden off of the corporate partner for doing the work of pitching your business.

Brian Ardinger: To a certain extent it’s oftentimes just finding what does that pilot first relationship look like, or that kind of first date and how would that play out so that both sides can become comfortable in that relationship and grow it as it goes along.

The other area I want to talk about is if it wasn’t already the case before, 2020 which has really put D. E. and I, diversity, equity, inclusion, front and center for most companies. And I’d love to get your insight and what you are seeing in the startup in corporate venture space and how folks are tackling and talking about D, E, and I initiatives.

Selina Troesch Munster: Yeah, it’s something that’s very near and dear to my heart. At Touchdown, we’ve really worked on trying to figure out how we educate ourselves about bias and the impact that those unconscious or implicit biases have on how we do our jobs. But also, how we can actually make difference out in the ecosystem.

It has had a lot of energy. Particularly related to improving the pipeline and hiring of minorities in whatever definition you want to, you know, make that, whether that’s people of color, whether that is LGBTQ and funds are really paying attention to their recruiting process. I think it’s going to take a while for us to see the results of that.

I don’t have any delusions that starting in 2022, we’ll have like this wonderful, diverse set of, you know, of partners. That takes time, especially in VC, where partner positions are rare or the ability to raise money has particularly been challenging. I think, you know, the limited partners and allocators are paying more attention to it and making sure that they include that in their evaluation process, especially with emerging managers. It’s going to take time. It’s going to take a lot of time.

And I think in the corporate space, where I see the most opportunity is using the existing diversity, equity, and inclusion initiatives to apply those learnings and insights and best practices to venture investing. And I’ve had a couple of conversations where we’re talking about potentially announcing an investment and you know, one of the questions is all right, where might we have risks from a diversity perspective in you know, announcing this. Is like, is there enough diversity on this team? And what may we, or maybe not get, in terms of PR blow back from that type of announcement.

Brian Ardinger: So, are you seeing a much bigger push from the corporates themselves to say, hey, we’re not only looking for companies in XYZ technology space, but we’re specifically looking for minority teams or, or different types of businesses, maybe even, then we looked at it in the past. Are you seeing that from corporates and they’re pushing that? Or is it you’re helping the corporates come along to that space?

Selina Troesch Munster: It’s a little bit of both. I think where we see it the most is actually, if we’re thinking about, you know, a particular business problem where maybe the e-commerce team says, you know what, we’re really not reaching this demographic. Help us figure out how to reach this demographic through the investment program.

So, it’s less about give me businesses that do a certain thing and more about help me understand this type of person that isn’t buying from us today that want to buy from us in the future.

Brian Ardinger: And then from the startup side, what are you seeing when it comes to diversity, equity, inclusion? Are you seeing startups being able to brace that more effectively in their partnerships and the relationships or what are you seeing on that side?

Selina Troesch Munster: I’m seeing a lot more emphasis on the board level. Finding diverse board representatives. And so, one of our portfolio companies, it was particularly important, I mean, she was a female CEO, but it was particularly important to her to have a majority of women on her board. So, identifying women with the good experience to help her achieve what she wants to achieve, but also maintaining that diversity of perspective. At the board level, it’s a really big focus and I’m seeing more and more advertisement, for lack of a better word, in pitch tags of the diversity of teams. And so, whether it is gender or racial diversity, all of those things are starting to come up more.

Brian Ardinger: Are you seeing different types of businesses and different types of even locations around the country and that, they’re getting on your radar because you’re casting a wider net or companies are asking for more and different looks?

Selina Troesch Munster: That’s a good question. I haven’t actually analyzed what our location diversity looks like. A number of our corporate partners are in the Midwest. And so have always had as part of the strategy, you know supporting startups in their own backyard. I don’t know exactly how that’s changed over the past year. That’s an interesting data point for us to look at.

Brian Ardinger: We sit in the middle of the United States and the venture world is different here than it is in the big markets. And it’s always interesting to see how those trends are playing out location or technology or otherwise. I guess the last core topic I’ll talk about is what’s new and exciting in your world? What are you excited about or what trends are you seeing? What are the things that you’re focused on?

Selina Troesch Munster: So, I personally am focused on Ag Tech and Lawn and Garden investing. I manage our program with Scott’s Miracle Grow, and it’s been a really interesting year because people have, you know, from a consumer perspective, really shifted into spending more time in their gardens and thinking more about growing their own food.

And so, there’s been an explosion in interest and technology to help people do that more effective. Both from a macro trend perspective, but also from an environmental perspective. I found it really fascinating how big companies and small are tapping into the wellness and environmental aspects of growing.

So that’s been particularly exciting for me. And then on the flip side, in terms of professional agriculture, all of the issues that COVID exposed about the supply chain and how that affects, you know, how food gets to us, how food is grown, the energy impacts of that. I just read an article about, you know, the rising cost of electricity and what that does to greenhouse growers. Because often they’re supplementing with light.

And if the cost of electricity goes up and you’re running on razor thin margin business at a certain point, it stops making sense. And so how do we help farmers with the systems that are necessary to better manage the business side of their business? In addition to the sort of the plants. So that’s where I’ve been spending my time. It’s, there’s some of the interesting stuff that I found fascinating, the sort of the big picture problems that we’re thinking about.

Brian Ardinger: That’s awesome. Well, I want to thank you again for coming on Inside Outside Innovation and sharing some of your insights on what’s going on. Hope to have you back out in the Midwest sometime soon. And we can talk further about this stuff. The last question I want to know is Giants or Dodgers. I know you’re based in LA, but which of the two teams is going to come through?

Selina Troesch Munster: Giants. I am a diehard Giants fan. This is apparently the only thing that is not good about me from my husband’s perspective, because he is a diehard Dodgers fan. So, we are a house divided for the, over the course of the series, and we’ll see what happens.

Brian Ardinger: It will probably be a tough week. This podcast will come out probably after the series, so we’ll find out if you’re right, and we’ll probably check back in to see how you both are doing.

Selina Troesch Munster: Yes. Let’s hope the marriage survives. I think it will.

For More Information about Touchdown Ventures

Brian Ardinger: Excellent. Well, Selina, if people want to find out more about yourself or more about Touchdown Ventures, what’s the best way to do that?

Selina Troesch Munster: I would go to our website, TouchdownVC.com. There you can link to our various content. Our blog is called Risky Business, and I am @SelinaTroesch on Twitter. So, you can also find out what I’m tweeting about. You can follow me there.

Brian Ardinger: Excellent. Well, Selina again, thanks for being on Inside Outside Innovation. Look forward to continuing the conversation in the future.

Selina Troesch Munster: Thank you, Brian. Appreciate it.

Brian Ardinger: That’s it for another episode of Inside Outside Innovation. If you want to learn more about our team, our content, our services, check out InsideOutside.io or follow us on Twitter @theIOpodcast or @Ardinger. Until next time, go out and innovate.

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Episode 271

Ep. 271 – Selina Troesch...