Innovation Investment
Authors: Andrew Tse
Investing time and money into innovation is one of the most interesting and difficult topics to understand, there are many variables that we are unable to account for. Most companies would find that their investment plans would change over time from how they are investing money into their team to investing money into the product. There are many ways to invest into innovation. Some of the important factors in investment is capital appreciation, equity, recognition from peers and upper management, plus more. In this segment, we will be covering investments in Silicon Valley and why it has been so successful.
Silicon Valley is home to many technology companies from some of the biggest, like Google to many small startups, like Gogobot. Words mentioned in a conversation about Silicon Valley usually has a mix of ideas, wealth of technology and the words ‘Venture Capitalist(s)’ and/or ‘venture capital’ mixed into the conversation. Silicon Valley accounts for one third of the United States venture capital investments. Venture capitalist(s) are always seeking a return and many companies are looking for ways to innovate to increase the returns and boast business.
INVESTMENT
Silicon Valley attracts the some of the most talented minds in the world. Some of the smaller companies put in more creative methods to finding and keeping the talent, while many of the larger corporations are able to can keep the talent because of their name.
VENTURE CAPITAL FUNDING:
Series Funding is a way for startups to gain investments to assist with growing their companies. Many startups may go through many different stages of funding while some only need a few. The usual steps to funding your company:
- Personal accounts – Funding the company from the founder(s) personal account to start the company
- Family and friends – May assist with helping you push your idea by investing into your company to help refine the idea/product
- Seed funding – Raising significant funds to support the initial idea from market research to developing the product.
- Series A – This is an opportunity for the business to acquire more capital to optimize the product
- Series B – This round would help push the product past the development phase to the next business level
- Series C – This is an opportunity for the business to scale the company and prefect the product for IPO or acquisition
- A company can go through more series funding, IPO or acquisition
To learn more about start-up Investment, read this article at Funders and Founders.
In June of 2014, Joyus went through their series C backing totaling at twenty-four million dollars and because the company is a little older with solid idea, they are now looking for ways to refine their product to improve user traffic and increase revenue. Silicon Valley is a great place to find a talent, but many talent people could cost a startup a lot of money. One of the cost saving methods that Joyus is looking into is acquiring talent outside of Silicon Valley to ensure that they are still getting the quality of work while decreasing their cost. Gogobots also recently completed their Series C funding in the fall of 2014. By keeping their family small at Gogobots, they are able to stretch the funding while keep the continuity of their work.
REWARDS
Every company has a different method on rewarding innovation. There are various methods to rewarding innovation, some of the rewards ranges from company wide recognition, capital bonus, stock options, etc. Every company we have met during our trip said that they will always find ways to recognize their employees for bring an innovative idea. One recognition method that every company we have met uses is a verbal and/or written recognition, ranging from a shout out during meetings to companywide emails.
From the eleven companies, everyone believes that recognition plays an important role to their culture and it would not be the same without the verbal/written recognition. There are other methods of rewarding innovation and it is more of a tangible product from money to stock options. There are many creative ways that Google is known for giving recognition, some of the popular choices are recognition in meetings, peer bonuses and spot bonuses. Gogobot provides an interesting approach to rewarding their employees for using their application during their vacation. Gogobot will pay for part of their employee’s vacation which will help Gogobot improve their application.
It seems like all the bigger companies, don’t ask their employees to innovate, but the employees innovate to assist them with making their day to day task simpler to make their lives a little smoother. When companies (usually startups) take the tradition method of VC backing they are being dealt a hand that forces them to produce and refine their product faster and better results, which in turns will push the company to being more innovative because they have to produce certain numbers by a certain time. If they do not, it will empower them to come up with a new idea, new strategy, stronger approach, etc.