Finovation Friday | Corporate Innovation, SigFig + UBS

LendingClub: An update on the continuing saga of LendingClub. While there have been multiple reports of investors pausing loan purchase and the tanking share price, a Singapore investment group stepped in and bought a nearly 12% stake in the company, with call options for another 6%. The share price has since been stable in the $4 range this week. Andrew Tauber from Firstrust argues that they should survive, but whether they remain independent or get acquired, the business model should change.

 

Really good piece on corporate innovation from Anand Sanwal at CB Insights. It is long, so I have placed it at the end. Summary is that corporate innovation gets little respect – if an established company does nothing, they are seen as dinosaurs. However, when they actually have some courage to try something new (rather than just talking about “innovation”), they are derided as the “dumb money” or just playing catch-up. True corporate innovation deserves more respect from the marketplace.

 

 

1. Automated investment firm SigFig has struck an agreement with UBS to provide investing technology to its advisors. This follows SigFig’s first bank partnership last month with $3.2B Cambridge Savings Bank. The B2B route is a different business model relative to its more well-known B2C peers, such as Betterment and Wealthfront.  This announcement comes with a $33MM funding round SigFig raised from Eaton Vance, UBS, Santander, NY Life, Bain, and more.
2. AIG is launching a new product called “Crowdfunding Fidelity” which is designed to “protect investors on equity crowdfunding platforms against fraud.” This is a product meant for the crowdfunding platforms to buy to protect its users, rather than each consumer buying their own policy when they participate in an equity crowdfunding campaign. Coverage is currently available in the UK and Canada.
3. Two more companies have joined the “B Corporation” movement. Joining current B Corps Patagonia, Etsy, Ben & Jerry’s, and Seventh Generation are VC firm Foundry Group, as well as new P2P insurance company Lemonade (announcement attached), which is expecting to launch in New York in a few weeks. Lemonade also became a Public Benefit Corporation – both are firsts for an insurance company.

 

 

 

Corporate haters gonna hate

Corporate innovation is hard.

Last week, we’d applauded some comments by executives at General Motors in our newsletter as they had candidly acknowledged the changes coming to the auto industry. While it is well known that change is coming to autos, many big company execs publicly pretend that it won’t impact them. And so GM’s comments were refreshing in their honesty.

We also mentioned GM’s investment in Lyft and acquisition of Cruise for a reported $1B+. The response I received from many about these deals was that GM is dumb money and chasing innovation.

And here is the Catch-22.

When corporations don’t do anything, they’re described as risk averse and behind the times. Dinosaurs, luddites, etc.

But perversely, when they do something (as GM is), all the back seat drivers aka haters show up to say what they’re doing is dumb.

Innovation and maintaining relevance is hard especially in companies that are decades or centuries old.

That’s why 99% of corporations just do the theatrics around innovation. You know the ones whose senior management talks about failing fast and disruption and who visit Silicon Valley VCs to “make innovation part of their DNA.”

And talking a big game is easy.

The problem is that corporations often suffer from a knowing vs doing gap.

There is no way to know if what GM is doing is going to work or not but at least they are “doing.” They are trying things and putting their money where their mouth is.

Instead, most corporations spend inordinate amounts of time trying to “know” which comes down to creating Powerpoint presentations with frameworks about markets, talking to VCs, and “networking.”

They are great at “knowing” but get tripped up on the doing part.

Because doing requires conviction and putting real money towards initiatives or bets. And some of these bets might end up being big or they also could go to zero. And the idea that something goes to zero is risky especially in corporations where failure is more often than not a career limiting maneuver.

I used to lead the innovation efforts at American Express so I have seen this from the other side.

If you are an employee at a big company that is trying to innovate, it’s a lot more fun and interesting to be at a place that is doing and experimenting versus one that prides itself on knowing and acting smart but which doesn’t actually have the courage to actually take risks.

So again, well done to GM for actually doing.

 

Have a great weekend!