Workday Ventures: “Navigating Corporate VC — Strategic Benefits for Founders”

Chief technologist at Workday and Savannah Green, principal at Workday.

Hello.

Good to see you all. We're really excited to have this conversation with you today about corporate venture capital. We've really planned for this to be more of a conversation. So we have about 15 minutes of content, and then we're going to open it up for Q and A. So get the questions ready. But before we jump into the agenda, we'll do some quick intros. So I'm Savannah. I've been on the Workday Ventures team for the last three years. When I started at Workday, I did a little bit of corporate strategy, but primarily have been an investor on the team. And my background is in did some finance, some tech, investment banking, and then investing at a couple other funds. I'll pass it to Erin.

All right. Hi, everyone. I'm Erin Yang. Been at workday for 12 years now. Spent the first eight in our products organization where I used to lead our technology product team in the last three years on the investing team here. So we're excited to tell you more about CVCs.

Great. Okay, so this is the plan for the next 15 minutes. We're going to start by kind of getting grounded in what is corporate venture capital? Why does it exist? Kind of what are the goals of CVCs? And then kind of flipping the table. As a founder, why would you want to work with CVCs? Kind of what is the value that you get? Then we're going to get a little bit more specific and dive into a case study. And then if you decide you want to work with a cvc, how do you go about that? How and when do you engage? And then kind of what questions do you ask to make sure that you're really aligned with your CBC partners before you build a relationship with them? So that's the plan. After that, we'll jump into your questions. Okay, so what is corporate venture capital? As most of you know, it's when corporations have some dedicated capital that they invest into into external startups. And so the number one most important thing that you want to understand about a CVC when you're engaging with them is what is their mandate? Why are they investing? And so you can really think of it as a spectrum. Most CVCs fall in some range from strategic to financial. And on the strategic side, it's really about kind of, from a CVC standpoint, some additional value for the corporate parent, which typically is some sort of partnership. And then on the financial side, they're really operating like an institutional investor, investing for returns. And then most CVCs like ourselves are actually some sort of hybrid. So either kind of their portfolio is a mix of both, or when they look at each deal, they consider both set of factors really important to understand about CVCs. And once you understand that, it also helps you understand kind of both the structure of the CVC and then how they participate. So in terms of the structure, some CVCs are an evergreen fund. So most strategic CVCs are an evergreen fund, which means that they can get capital as needed from their corporate parent to invest. It gives them more flexibility, they kind of have a longer, they can be more patient with the capital and they can really think strategically. Alternatively, some CBCs can have a single LP which is just the corporate parent, or kind of very rarely CBC's can have multiple LPs. And the final thing to understand about CVCs is how they participate. So actually most CVCs can lead deals 66% but it's still rare that they lead most of their deals. So 36% of CVCs lead at least 30% of their deals. And again, this tends to be more in line with the more kind of financial institutions, institutional VCs and then also CVCs can take board seats, 59% can take board seats, and then 90 plus percent take board observer seats. So they can't participate, but they can be in the room. And then in terms of check size, just like with all CDCs, there's a range. And again this really depends on whether or not they're leading the deals because they typically don't lead all the deals. The check sides can be on the smaller side. 1 million for pre seed, ranging up to 7 million for later stage. So that's really kind of when you think about it from the CVC standpoint and kind of what's happening behind the scenes, that's kind of how it works. Okay, now most importantly from the founder perspective, why would you want to work with CDCs? What's the value that you would get? So we've kind of put it into four different buckets. There's a bit of a framework of how you can think about working with CDCs. And the first bucket is on the go to market side. And that can really range from kind of formal agreements with the CBC and with the corporate parent to more informal types of agreements. So on the formal side there's different kind of commercial arrangements. The corporate parent could resell or kind of co sell the portfolio company product, an oem. Sometimes the sales teams within the corporate parent are incentivized around selling the portfolio company's products. And those are things you really want to understand before when you're engaging with a corporate vc. And then on the more informal side they can make introductions to their sales teams, to the account managers. And then the final category, which is a bit different than the first two is sometimes you can also get an introduction to the buyer at the corporate parent and the CBC company or the CBC parent can become a buyer of the portfolio company. A lot of times that's not guaranteed but. And sometimes those conversations are even kicked off during the diligence process and sometimes the CVC won't invest, but the company still becomes a buyer. So it can be another reason to engage that's kind of on the go to market side, I guess kind of tightly aligned to that is around brand awareness. So participation or sponsorship at different events. You know, corporations can have partnership events, sales events, industry events and all of that can be a good way to both meet customers, meet product teams, generate leads and generate just general brand awareness. And then of course there's, there's co marketing in terms of product synergies. A lot of times the portfolio companies will get introduced to product leadership, can start building out some joint use cases, do some solution mapping and some marketing around some joint use cases. And so that can be kind of a really big value add for the portfolio company can be those integrations and those use cases. And then the final category is really around kind of networks and advisory services. So you might have your board but you can think of your CVC partner as kind of another channel for advice and that can be across go to market product finance. You can get connected to different leaders within the company to give advice or to external networks. Another kind of way you can tap into your CBC connection can be through recruiting a lot of times can kind of share talent and help fill open headcount and then finally just kind of other introductions like similar to kind of some of the networks that institutional VCs might have but to other VCs to industry analysts and things like that. So those are kind of some of the high level ways that you can think about working with CBCs. But Erin has a case study to kind of help us get more rooted into what that might look like.

All right, thanks Savannah. So we thought we'd give an example from our own portfolio. So workday ventures, we are a more strategically oriented CVC. We invested in BetterUp, which is a employee coaching and mental health assistant. Had a lot of synergies from a go to market perspective. You know, similar or same buyer, same Target sort of customer base and we made an investment in 2018 in between rounds. So I'll talk a little bit about the timing of when to approach a cvc, but a few of the benefits that Workday Ventures provides. One is you automatically become part of the Workday Partner program, which for younger startups can be a little bit challenging. And to date we have over 450 joint customers now using the integration that they were able to build as part of that program, which was able to be certified by Workday, which means it's got the Workday stamp of approval. Brings a lot of credibility when you're a young startup selling to large enterprise customers. So obviously have a lot of customers using that today. The other aspect, Savannah talked about some of the go to market benefits of CVCs. So while Workday doesn't typically do like a reseller type agreement, we do bring our portfolio companies to our customer conferences which are very active. It's limited to our customers and prospective customers. And so our portfolio companies tend to get a really rich source of leads from attending this conference. And then finally in terms of the network that they're able to connect to through Workday, we've actually had really good alignment with the product team on both the Better up and the Workday side. So they're currently in progress building out a new connector that connects Workday PCON, which is our engagement survey capability with BetterUp, so that you can take the results of your survey and then actually act on it through BetterUp. And so these are just a few examples of how a CVC can help really generate both credibility with your customers, get you introduced to new prospective customers and further new integrations that customers are looking for. And so how and when should you engage with a cvc? So you know, first off, you know the biggest thing I would highlight here is to think about what your goals are as a founder for your startup and try to better understand what the goals are for the cvc. So if the CVC is a more strategically oriented fund, then really understanding like what the strategy is for the panel parent company can be very helpful and make sure those align. If they don't align, it's probably not a good fit. And then use that alignment in how you message and outreach to the CVC position. How would you benefit that company and ask the CVC to share how they would bring value to you as well. The other thing I would highlight is really understanding who the joint customers are and what their use cases are. You know those sorts of anecdotes go a really long way when we're having conversations with startups of this customer has already made this request that really strengthens the potential relationship there. And then some obvious things on how to reach out. But the one that I say maybe doesn't get used as much is actually using your customers as a way to introduce yourself to CVCs. When we've gotten inbounds that came through a CSM or someone on the product team where a customer actually shared that they would be interested in an integration between workday and another company that carries a ton of weight because that means there's already a customer ready who wants to see that relationship be stronger. In terms of timing, I would say think about reaching out to CVCs even outside of when you're thinking about fundraising. And part of that is especially for the CVCs who don't lead rounds, they tend to be more willing to do deals in between rounds. And also CVCs, especially if they're strategic, may need a little bit more time for diligence and to determine that strategic alignment even on top of additional diligence that they're going to do on the financial side. And that diligence can actually be beneficial to you. So so as part of our process we'll often introduce the startups to our product teams which can get them a jump start on potential product partnership even if we don't invest. And similarly we'll often introduce them to the actual workday buyer which can get them sort of in the door for the future. When that buyer is doing an RFP in the space, they'll already be familiar with the company and so getting the conversation started early can be a good thing and maybe even lead to a pocket and then finally what questions to ask. So I won't run through each of these in detail, but ultimately it's about understanding what are the strategic objectives of the CVC and making sure they align to yours. We've seen in some cases where like CVCs for system integration companies like some of the metrics that they measure are these services that they sell on top of the startup that they're investing in, which can be great for some companies where there is a more go to market around services, but then there are some that the company wants to be more self service and so maybe that sort of alignment doesn't make as much sense really. Ask about what the value is that you're going to get besides capital. We've met with CVCs who like a chip maker, they're expanding the ecosystem around using the chip. So if you're planning to use that chip heavily in your product, that can be a great relationship. We've seen others that offer cloud credits because they have their own cloud and can offer that. I've seen some private equity firms have a small VC fund on the side, just not just to stay close to innovation, but to also distribute that to their portfolio companies in their private equity portfolio. And so there can be a lot of benefits that you might not be thinking about that they can share with you. And then in terms of timeline and process, like I said, there might be some extra steps around strategic alignment. So really understanding the timing of that, whether there's a sponsor that's required from the business to make that decision, there's often an investment committee. So, you know, we have an investment committee, but it's only at a very high dollar amount that requires approval. But understanding what those different triggers are can really help so that you don't, you know, slip on your planned close date and then finally do your diligence on the cvc. You know, oftentimes I think the best founders we end up investing in have spoken to other founders in our portfolio and really understood, okay, what are some of the benefits, maybe what are some of the downsides of taking money from a particular cvc? And so those, I think you'll get a much more better picture from folks who are already in the portfolio and have had that experience. So these are the slides that we had prepared. This was originally a brain date, so we'd love for this to be as conversational as we can make it. And I think they put a mic here for questions if you have them. So we'd love to hear any questions that you have on this topic. We've got someone here. There's a mic up there, if you don't mind.

So what challenge have you learned the most from working with workday ventures and CBCs?

Challenge for us or Challenge for founders?

I'm kind of curious about challenge for you guys.

You know, like, in total honesty, I think the biggest challenge is that we do want to get alignment with our product teams. And so Workday's product is just very vast. And so basically almost any startup has some sort of level of overlap with the Workday product suite. And so I think it's more educating our product teams that this is something that's natural and is expected and that we're sort of encouraging. That is probably one of the challenges that we have.

You know, HR and payroll have many adjacencies.

Is there a particular type of business you look for and also stage of.

Business that you look for, Sure, I can start and then feel free to jump in. So in terms of type of business we look for, yeah, HR is really broad. So we have investments across kind of learning and upskilling, performance, recruiting, talent, workforce, workforce. So as Erin said, we really do look for kind of synergies in the business. I would say the other important thing that we look for is companies that can kind of support enterprise workdays and scale and size of customer. So if they're not kind of targeting enterprise customers today, that's kind of on their, their immediate roadmap. And it's partly because we're ideally making introductions to customers, and so we want to make sure they'll be able to come kind of handle that relationship. So in terms of stage, it typically is series A, series B, because that's when there's kind of product market fit, kind of we can add the most value to our portfolio companies, and then we also think they can kind of add the most value to our customers. And then it's really about working closely with our product teams to understand our own roadmap and where there's synergies and not too much overlap. But it is, it is pretty broad. But those are a couple of the things we care about.

Hi, this is Manish Pandari, founder of growthpan. My question is, do you invest to acquire? If so, how does that work? And if not, what is your exit strategy?

So I will say we don't invest to acquire, but when we acquire, we will look first at our portfolio. If you look at the statistics, we've made about almost 50 investments since 2018 when we launched, and we've acquired three companies out of that set. So it's not a, it's not a huge, like, pipeline generation, but it is certainly when we want to acquire in this space, we will look first at the companies that are in our portfolio.

And I would just add, like, it can be nice because sometimes you're building a relationship with the company and they get comfortable with you as well. So when it makes sense on both sides and everyone's happy, that's great. But as Aaron said, it's not.

And I know I'm biased, but I do think it's a good idea to have a strategic, you know, on your cap table who could be a friendly exit for you, for those founders in the room. Yeah.

Hi, I have a question about the enterprise app marketplace that you've got. Are you involved in building out the app marketplace of the CVC team? And secondly, Is that an important source of leads? Like, do you have independent vendors that build something on top of the marketplace and then they kind of reach out to you and say, hey, we'd like you to become our shareholder?

Yeah.

So I'll answer that somewhat on behalf of product because the last team that I ran was Workday Extend, which is our application process platform as a service. So the app marketplace I mentioned is run by our Alliances team. So it's all part of the Workday partnership program. You have to be a Workday partner to be able to post an app there. There are plans for the Workday Extend product, which allows third parties to build on top of the Workday platform. There are plans to open that up eventually to third parties and to have a marketplace of those applications. We're not quite there yet. And that's not run by the Workday Ventures team. Although, like I said, when we make an investment, they're part of the Alliances program, so they can post in the existing marketplace and they sort of get in front of the line for new products, launches as well.

Hi, thanks for the session.

My question is, would you invest in Canadian startups the same way as you invest in US startups?

Sure, I can take that one. Yeah. I mean, we're definitely open to kind of globally based startups. I think for us, we look more at where the kind of customers are and if that aligns with Workday. And so we do like to see some sort of, if not kind of immediate presence in, in the US Maybe some plans to have a presence in the US but definitely open to Canadian startup. And we, and we have some portfolio companies in Europe and in emea. So yeah.

Hi, my name is Bri. I have two questions. My first one is what are the most common misconceptions you see that founders have when it comes to, to the CDC process?

I can jump in. I don't know if this is exactly a misconception, but it's more kind of an understandable place that founders come from is that sometimes there's a little bit of skepticism working with CVCs and just kind of trying to figure out kind of who, where the, where the trust is, can we really trust our corporate partner? And so I'd say especially in areas where it's like where is kind of Workday product, where is our portfolio company product. And so we just try to be really like open and transparent with the founders. But we've had some just be a little bit, I guess, skeptical and protective, understandably of their portfolio company. So I'd Say that's the kind of thing I've seen a bit.

The only thing I'd add is I think Savannah did a good job going through the details of what the benefits could be for a cvc. Like on the go to market side, I often see founders sort of blend it all together and make assumptions about like that there are resell or channel opportunities when it's more like the soft customer intro that is available. And so I think that's why asking in more detail what the the CVC can offer is a really good idea.

Thank you. Kind of maybe answered my second question. But at what point do you see founders really like trip up? Like does that make sense?

Trip up from what standpoint?

I mean like at what part of the process, whether it be like, you know, finding product alignment or actual like go to market, do you find founders have a lot of challenges and do you have any tips for when they reach that point?

I think where we see more challenges is there's a lot of tech oriented founders who are more the mindset of like if I build a great product, they'll come and they don't necessarily have a clear go to market strategy. And so that's often where we try to help because we do have a very large like sales team that knows how to sell into large enterprise and we have a couple of of advisors who will meet with the portfolio companies. I think how to sell into large, larger enterprises is something that many founders think that they can do easily but it's sort of its own art.

Thank you. You're welcome.

Good morning and thanks for the talk. My question's around what resources do you have post investment to help make founders.

And their successful from workday ventures specifically.

Yes, I can start. So we have a couple folks on our team who are really dedicated to the portfolio experience and they come from our software alliances program. I'd say one of the biggest value add from the workday ventures standpoint is that workday typically doesn't give access to development tenants. We're really hard to integrate with. So our portfolio experience team will kind of shepherd our portfolio companies into the partnership program where they can kind of build out an integration around joint use cases and that type of thing tends to be a really big one. As Erin mentioned, we have our advisory network of kind of internal advisors across a lot of different core functions. We have our customer conferences and we do make introductions to customers when that's approved appropriate. But we, we take a lot of pride in our portfolio experience and in making it really, really valuable for, for our portfolio companies, I will say to kind of Aaron's point, we don't do the kind of co selling, reselling and that is the kind of conversation we have to be really upfront about our portfolio companies with our portfolio companies about. But we, we do put a lot of energy in trying to make us a value add for them.

All right, I have two questions.

What stage of the company are you.

Most comfortable investing in?

And second one, you have a preference for companies from Pleasanton.

Go to the second.

Well, the stage is series A, Series B. So sort of have achieved product market fit, maybe a few, or at least a few workday customers ideally and you know, growing from there. And neither of us live in Pleasanton so we're not biased towards East Bay. Yeah, we, we invest everywhere.

Hi, my name is Oz. You were mentioning about kind of hr, broad based portfolios that you work with. I'm particularly interested in the hiring and recruiting space. What type of innovations are you seeing in that space that you think are going to transform that industry in particular over the next five to 10 years?

I mean, I think that one of the biggest things you're seeing is conversational AI and AI in general in that space. So both on the candidate experience side as they're like engaging with companies, but also as companies are searching for candidates. I don't know if you want to add.

Yeah, and I would say that also applies to kind of retaining talent as well. Say 90% of our time has something to do with AI these days. So that's probably not a huge surprise. But definitely on the, on the recruiting side.

Hi, you mentioned that on the lower end you're investing in series A type companies. What are the minimum requirements now that you would kind of title Series A.

Yeah, we actually don't really have hard metrics on that. The biggest thing that we look for is if there are workday customers who are on the product. So even if the revenue is low, if there's like a couple of big workday customers that will pique our interest and then I don't know if you want to add.

Yeah, yeah, I think that's probably the biggest thing. Yeah. And we do, I mean like most VCs, like we'll talk to customers as well and we will, whether or not, as we said before, become a buyer. We put them in front of our buyer for feedback. And that is also kind of a customer diligence call if you will. So it's really about the like product. And then a couple quick.

Hi, my name is Nikhil and my question is that as workday expanded into now financials and other areas, do you invest in the companies who have the similar functionalities, what now workday have or only with complement and not competing?

You know, I think right now our focus is actually around our finance products. From an investment perspective, I think there's a lot of opportunity to improve. Just, just I think like there's a lot of more domain specific, vertical specific offerings. I think there's a lot of innovation to come in the financial space. But we also, I think every company pretty much has a little bit of overlap with workday. And to Savannah's point, we try to find it where it's not in a strategic area on both sides. And also we do have a category of investments that are more on the technology. So if there's some sort of innovative technology that we believe is going to impact the enterprise market and perhaps there's not a clear integration today, we'll still make that investment because, you know, we are looking toward the future.

Yeah. And if the question also is we, we've never done an investment that's like a work day for some kind of specific geography. It's more synergistic rather than kind of offering what we have to target a new market. How we've been today.

Hey, interested in your strategy for follow on investment, what that looks like if you do follow on investment and if so, what do you look like? What do you look for in that organization that you've already done an initial round in to go forward for a follow on?

Yeah, I would say that has actually changed over time. So our current stance has been in general we don't do follow on investments, but we will evaluate on a case by case basis. All right, so I think we're pretty much up on time. Thank you all for all the questions. Great questions. We'll stick around for a few minutes here if there's any additional questions that you have. But thanks so much for your time.

Thank you.