As an investor, you have to allow yourself the time to develop conviction before making an investment because without conviction post-investment, you are going to struggle. 
Merging Paths and Perspectives in the Investment World
Sep 26, 2023
Interviewed by Nicolas Sauvage on December 8th, 2022
In the dynamic world of corporate venturing, the journey of Pramila Mullan, partner at IBM Consulting, stands as an unconventional and enlightening example. Pramila’s path, which began in research and development at Bell Labs during the 1980s and 1990s, has led her through a rich tapestry of experiences, from startup endeavors in the Bay Area to her current role as a leading figure in the ventures and ecosystem division at IBM Consulting.
The Foundation of Experience and Education
Pramila’s journey is characterized by her engineering background, seasoned with an MBA, and a profound passion for understanding the intricacies of technology. She firmly believes that the pursuit of an MBA is not constrained by timing but rather by the alignment of individual aspirations and development opportunities. This philosophy underscores the essence of understanding one’s journey and strengths, leading to targeted and effective skill development through various avenues, whether formal education or alternative learning pathways.
As she explains, her engineering and R&D background has not been a limitation but an asset in the world of corporate venturing. This foundational knowledge equips her with a deep understanding of technology intricacies, providing a unique lens through which to navigate the complexities of innovation. Pramila acknowledges the growth she’s experienced in the realm of corporate venturing, highlighting the continuous process of learning and adapting.
The Synergy of Corporate Venture Capital and Open Innovation
As a prominent figure in global systems integration and CVC, Pramila expounds on the symbiotic relationship between corporate venturing and open innovation. This synergy, as she explains, goes beyond investment, extending into the realm of providing startups with credibility guidance. She underscores the significance of collaboration and partnership, whether or not an investment is at stake, emphasizing the mutual benefits of shared expertise and insights.
“Investing will help you hockey stick your relationship but you can partner with a lot more companies than investing,” Pramila explains. “So my recommendation to every company is to embrace these tools of innovation to the fullest and leverage them to the fullest based on the specific need.”
Continuing the conversation of partnerships, the topic of deal flow is brought forward. Deal flow, as she highlighted, isn’t a one-way street but a multidirectional process. Startups not pursued for investment can turn into valuable partnership opportunities, creating a cycle of growth. Here, flexibility is key. Partnerships that adapt to startups’ evolving needs flourish. This adaptability necessitates transparent communication, as honesty fuels trust. Credibility isn’t just about reputation, but rather genuine understanding and commitment.
Scaling Startups through Open Innovation
Pramila delves deeper into her role in open innovation, elucidating her engagement with startups at pivotal growth stages. Her focus centers on startups that have secured their “lighthouse” client win, indicating their readiness to scale and expand. Here, Pramila’s product management skills shine, enabling her to systematically and methodically guide startups through their scaling journey.
“And helping them scale these product management skill sets again help you with a discipline in scaling methodically, systematically, working with that startup, doing the rinse and repeat,” says Pramila.
Strategies, Philosophies, and Balancing in Acquisition
The conversation takes a turn toward the realm of acquisition, shedding light on different strategies that corporations can adopt based on their investment thesis and startup conditions. These strategies, deeply interwoven with a company’s investment thesis and the unique attributes of the startup in question, paint a vivid picture of the complexity that underpins such decisions.
One path involves the outright acquisition of a startup. This entails the purchase of the entire company, seamlessly integrating it into the parent company’s operations. This avenue is an alluring one, particularly for those seeking swift access to cutting-edge technology, intellectual property, or new markets. However, the allure comes with its own set of considerations. The financial commitment can be substantial, and the alignment between the startup and the parent company’s mission is paramount for success.
“Merging an acquired company, two companies with two different cultures, and coming out of that equation with success requires a lot of work,” Pramila states. “The value that an acquisition brings in terms of taking a company into adjacencies that they wouldn’t be able to go into otherwise; this is why acquisitions are such an important part of that equation.”
Contrastingly, an alternative approach is also brought to light, where investment precedes acquisition. Here, a company strategically invests in a startup, keeping the door open for future acquisition. This approach offers a testing ground for both sides- a trial period to discern compatibility and potential synergies. Startups on the brink of readiness for acquisition can tap into the larger company’s resources, nurturing their growth. However, this route requires a calculated evaluation of the startup’s trajectory, tempered by the uncertainty surrounding the eventual terms and timing of the acquisition.
A scenario may also emerge where abstaining from direct investment precedes acquisition. This can lead to a strategic partnership, allowing the larger entity to gain insights into the startup’s mechanics before committing to a pivotal decision. Such a path illuminates the pragmatism required in these spheres- an approach tailored to gain an in-depth understanding of the startup’s core before embarking on the acquisition journey.
Throughout this intricate process, Pramila highlights how important transparency and honesty are here. CVCs must extend a candid hand to entrepreneurs, clarifying the potential for acquisition, thus managing expectations and enabling entrepreneurs to steer their ventures with astuteness.
Building the best CVC Team
In navigating the complexities of equity investment, Pramila accentuates the significance of team composition, emphasizing diversity as a wellspring of varied perspectives and insights. The key, as she states, is to ensure you build a team with complementary skills but also diversity, as it is crucial to recognize that no one person has all the necessary skills and expertise to make successful investment decisions. Instead, a team with diverse backgrounds and experiences can bring different perspectives and knowledge to the table, leading to a more thorough analysis and better-informed decisions.
Moreover, having a diverse team can help to minimize groupthink, where individuals conform to the dominant view and avoid presenting dissenting opinions. This can lead to blind spots and biases that may hinder investment performance. On the other hand, having team members with different viewpoints and backgrounds can bring up potential issues and risks that others may have overlooked.
Cautious and Careful Speeding
In addition to team composition, Pramila emphasizes the importance of decision-making in equity investment due to the imperfect information that is often involved. With limited information, it can be difficult to evaluate potential investments thoroughly.
“You have to allow yourself the time to develop the conviction before you go off and speedily make an investment,” Pramila explains. “Because without the conviction post-investment, you’re gonna struggle.”
She stresses the need for strategic VCs to balance speed with thoughtfulness when making investment decisions. While being quick to seize opportunities is important, it is equally important to take the time to analyze and understand the potential risks and rewards of an investment fully. This allows for the development of a strong conviction in the investment decision and can help to avoid post-investment struggles. Here the importance of having a clear investment thesis is gold. It provides a framework for evaluating potential investments and helps to avoid investments that do not fit within the scope of the fund’s strategy. By focusing on companies that have validated their NVP with few clients and are looking to scale or partner, Pramila’s fund can take advantage of opportunities while minimizing risks.
