Nokia places a call to VCs

Image courtesy Nokia Corp.

The No.1 mobile-phone manufacturer announced it is doubling its bet on its existing venture arm, Nokia Growth Partners in Menlo Park, California, by putting up a second $100 million in investment funds for it to manage. But rather than invest the new money directly, it will funnel it through other fund managers it selects.

“We’ll be investing in a variety of private equity and venture capital funds,” said John Gardner, a newly appointed leader of the fund, in an interview with Science|Businesss. The aim, he said, is to “leverage the reach” of Nokia’s investment strategy – that is, through other fund managers, expand the number of companies, entrepreneurs and technologies that Nokia, through its investments, pulls into its network.

Corporate venturing is a well-established form of investment these days, with most technology multinationals dabbling in it. In most cases, it’s a low-cost way for the corporations to get a window on – and some control over – important new technologies that they could incorporate into their own products and services. That’s the way such multinationals as Siemens, Intel and Philips have long played the venturing game.

A new departure

But lately, a few multinationals have started to get closer to the venture-capital industry – in essence, betting on the professional investing community to make the smartest choices about what will become hot five or 10 years from now. In that vein, IBM and Microsoft have launched programmes in the past two years to collaborate with VCs around the world. And major pharmaceutical companies have long invested alongside VCs, as a way of maintaining a hold over a biotech start-up’s technology while reducing the amount of their own capital at risk in the venture.

But Nokia’s approach combines corporate venturing with a “fund of funds” strategy, as it calls it. The manager of a fund of funds selects other investment managers to invest in, constructing a portfolio for his clients that permits deep investment in a sector without having to gamble it all on one individual fund manager. “Nokia has charted its own course since the beginning” of its venturing activities, said Gardner, when asked about the strategy.

In a statement, Tero Ojanperä, Nokia’s chief technology officer, said: "It is obvious that today's mobile handset is about photos, music, TV, video, navigation, buddy finding, even social networking. Media sharing and staying connected is what the phenomena is all about", said Ojanperä. "In order to capitalize on these trends, Nokia will need to partner with third parties and adapt and adopt with greater speed and agility than ever before. Nokia Growth Partners plays a key role in allowing Nokia to tap into venture capital driven innovation, and this expansion is further evidence of our commitment to venture capital investing as part of our renewal initiatives."

The investment strategy

Gardner said the extra $100 million will be invested in two “buckets” of funds – one set that invests in digital content, media and services, and another that invests in such emerging regions as India and China. He said Nokia is “looking to invest in funds that themselves have a successful track record of investing in people and companies.”

Nokia Growth Partners began investing its first $100 million in 2005, in conventional, direct investments into technology companies around the world. Gardner said not all those funds have yet been invested. Among the fund’s disclosed investments have been Bitboys, a Finnish designer of graphics chips for mobile devices, and Sasken Communication Technologies Ltd., a Bangalore software-developer for mobile devices.

Nokia named Gardner and Paul Asel to lead the venturing effort. Gardner was a patner in BlueRun Ventures, a Menlo Park VC. Asel led the technology investment practice in India of the International Finance Corporation.