When starting out in a new CVC, it's essential to establish credibility and reputation, and one effective way to do this is by running accelerator programs or initiatives that demonstrate your commitment to innovation and growth because, over time, those efforts can evolve into valuable tools for managing and supporting a portfolio as you expand into new areas. 
The Chinese Wall of Corporate Venture Capital
May 16, 2024
Interviewed by Nicolas Sauvage on September 18, 2023
With a background in law and a passion for entrepreneurship, Peter Wozny, senior counsel at BTomorrow Ventures (BTV), delivered valuable insights to Corporate Venturing Insider. Learning his way from corporate law to private equity to venture capital, his extensive legal knowledge was essential at the birth of BTomorrow Ventures.
BAT and BTV
BAT, British American Tobacco, is a leading FTSE 10 company that has been associated with traditional tobacco brands for some time. When nicotine sales began declining worldwide and regulatory challenges were mounting, health-related concerns drove consumers to seek alternatives to the drug. BAT recognized the need for transformation and began diversifying into new product categories such as vaping and heated tobacco.
“It’s finding these new spaces where it can entertain and enhance their consumer needs,” Peter said. “So (BTV) can build a multi-category portfolio in different spaces and look at products that can stimulate the senses of adult consumers.”
Peter said that’s where BTV and BAT combine forces and work together to achieve the company mission. BTV does its part by exploring opportunities beyond nicotine by making minority stake investments in sectors like food and beverage with functional aspects. The investments ranged from caffeinated chocolate bars to cannabis-related products to nootropics, adaptogens, and melatonin to address different consumer needs.
Like all other CVCs, BTV brings to entrepreneurs its mothership’s expertise and market presence. By formulating strategic collaborative relationships between the startups and internal business units, the fund optimizes supply chain operations, improves sustainability practices, and explores new technologies in vaping and other trends.
Peter played a pivotal role in shaping BTV’s investment strategy while leveraging his legal expertise to navigate the ecosystem.
Accelerating Credibility and Reputation: BTomorrow Labs
When BTV launched it faced a challenge that several other CVCs face. It lacked the reputation to encourage startups to join forces with them. Peter emphasized the need to persuade and demonstrate to the entrepreneurs that BTV was not just a partner but a catalyst for their growth. BTomorrow Labs was created to solve the growth conundrum by being an accelerator program designed to encourage startups into the BAT and BTV world. The lab had many programs that provided startups with a springboard for growth and innovation, spanning from beverage and food companies to science and ESG-focused ventures.
“It’s maintaining that they’re being linked with different markets within BAT, where we can utilize BAT’s strength to help grow and support the companies,” Peter said. “It’s a nice way to see how CVCs adapt and grow within themselves as their portfolios grow, and they expand into new spaces.”
As BTV amassed a successful portfolio over time through collaborations and investments, evidently its street cred in the market grew and the Labs program transitioned from a launchpad for startups to a vital portfolio management component.
DEI at BTV
Diversity, Equity, and Inclusion (DEI) is a critical aspect of venture capital that can be overshadowed by financial metrics. Peter said people’s approaches to DEI can vary depending on the cultures within VCs and CVCs alike, especially when they’re dealing with a global portfolio of companies.
“As a CVC, you have a role, a position of power, where you can encourage your companies to take up and adopt certain policies, including how they treat their employees and how they treat their customers from a fair and equitable stance,” Peter explained..
At BTV, Peter and his team set a good example for their portfolio by being committed to DEI:
- Internal Policies: Measures to eliminate unconscious bias in the recruitment process as the recruitment team is tasked with removing any indications of gender, sexual orientation, or race from CVs.
- DEI Training: BTV has introduced DEI training programs for its employees and portfolio companies to help support a more inclusive environment
- Pipeline Building: BTV is actively involved in building an unbiased and diverse pipeline of investment opportunities, including supporting underrepresented or minority founders
- Monitoring and Data Collection: BTV gathers voluntary data from portfolio companies outlining the percentage of female founders or female board directors as well as details about their D&I strategies and policies
The Chinese Wall in CVCs
The notion of acquiring startups as part of a CVC strategy is not uncommon. Some CVCs follow a predetermined path when building their portfolios, seeking to identify startups they can potentially acquire down the road. The real challenge lies in how to communicate and navigate this process without compromising the startups’ innate drive for innovation and success. At BTV, the strategy is clear: while the potential for acquisition may exist for some startups, it is not communicated to them in the early stages. This avoids anchoring startups and entrepreneurs into a predefined path that might not align with their organic growth as a company.
BTV focuses on encouraging startups to perform at their best and achieve specific revenue targets. When a startup demonstrates its capability to independently succeed, the possibility of an acquisition may emerge, but Peter notes that there is no need to discuss it before the opportunity arises. This approach not only preserves the startups’ competitive edge but also allows them to chart their course with genuine innovation and ambition.
“The Chinese Wall is between any information that the startup has that could be of competitive value to the corporate and then vice versa,” Peter said. “So really the CVC, BTV in this case, is that middle person which acts as the gatekeeper between both sides.”
Peter highlighted diligent monitoring within the CVC team, which includes understanding the markets in which startups and the corporate entity operate. When potential conflict arises, information barriers are established to segregate discussions and protect sensitive information. By avoiding premature anchors and diligently implementing the Chinese Wall, BTV has been able to see its long-term success through the diversity of its portfolio.
