Honda’s Open Innovation Arm Reaches Silicon Valley

Essindi

Some view corporate venture with suspicion, as signing up for funding from industry behemoths doesn’t come without strings. However, CVC fits many firms better than institutional investment, as corporates fortify startups with connections, advice and built-in partnerships, plus capital. And lately, these entrepreneurial branches off massive companies have proved themselves compelling contributors to the VC ecosystem. According to PwC and NVCA, the first half of 2013 saw almost 11 percent total investment originate from CVCs — the highest that level has been since 2001.

Teaming up with corporates can mean red tape and innovation slowdown; but it doesn’t at Honda Silicon Valley Lab. Japan-based Honda’s open innovation arm prefers to play customer, rather than puppet master, to disruptive enterprises it backs. Red Herring spoke with Dani Behrendt of HSVL to discuss what make the lab’s approach so refreshingly distinct, and what’s up next (hint: smarter cars).

What does Honda Silicon Valley lab bring to entrepreneurs that traditional VCs don’t?

First and foremost, a deep understanding of the automotive industry. We are in the car industry, so we understand it very well…same thing for our other lines of businesses, whether it’s motorcycles or now, jets or Powersports.

 But for entrepreneurs, what we bring at Honda Silicon Valley Lab is the prospect of a great customer. Because our model––and we always say this to every entrepreneur we interact with, our goal is not to own equity in the company. Our goal, as Honda Silicon Valley Lab and as Honda, is to be [a] future partner of that company. We provide technical insight as well as market validation that traditional venture capital guys cannot provide.

 What does Honda give entrepreneurs that it can’t get from other corporate VCs?

I can tell you what we bring to the table, and I’ll let you compare it to others. Honda’s a very entrepreneurial company. And that is the DNA of the company. It was created by an amazing entrepreneur, Sochiro Honda, in 1948 as a small motorcycle company, and that DNA permeates everything we do. We understand the passion that is required to create a business and to create…technology and to have a dream. For us, it’s all about pursuing your dreams and creating those dreams. So that’s what we bring to the table, that understanding.

Of course having said that, we also have pioneered a number of breakthroughs; so we also understand that it’s not only a dream, but how can you be pragmatic enough that you ensure that dream becomes a reality and becomes a successful product that is adopted globally.

Keeping in mind your corporate and Japanese structure, how fast is your decision-making?

Our structure is very unique. We’re built for speed, us being a car company, and [the] racing spirit is very much alive and present at Honda. Once we find something that interests us, we try to identify whether the company’s interested in working with us as well, and we fund a prototype or a proof of concept. We have an internal goal [that] that prototype should not take more than three to six months to build, and that’s enough to demonstrate whether the breakthrough technology can translate into customer value. We report directly into the CTO and the executive suite organization on the product side, on the R&D side [of] Honda. That direct link allows us streamlined decision-making where we cut across [much] of the red tape.

How would you characterize Honda’s position in its ecosystem?

We want to fully operate like a open innovation platform, so we want to engage the ecosystem with open doors. We are connecting cars, we are connecting drivers and we would like to allow as many technologies as possible into the car; of course that’s not always possible because the safety considerations, because safety’s number one for us.

 Having said that, we are totally an open collaborative organization. That’s how we see our role in the ecosystem, more as facilitating and gaining value from outside technology and hopefully also delivering value to our partners by giving them access to our customers, to markets, and to know-how that they may not have.

In the future, will Honda expand its approach to integrate everything consumers want?

It’s a balancing act between convenience and safety. But there’s no doubt that we are going in that path, connecting cars and connecting drivers to services, apps, and experiences that drivers can have outside of the car. If you think of it, today, the car is the fourth screen. You may have a screen at home, a screen at work, and then a mobile screen, whether it’s a tablet or a smartphone. But all the connectivity and all of the richness of those experiences, once you enter the car, they’re interrupted. So at best, you make a phone call, or listen to Pandora. We at Honda Silicon Valley Lab are working with [a] next-generation platform to allow that seamless integration between the screen of the car with the other screens in your life. So your experience in your life is more integrated when you are in the car. Of course, again, that’s the convenience part, and we’re working on making it very safe.

What gets you out of bed and into the office everyday to keep innovating?

It’s a dream job. I think I’m blessed. Dealing with bright entrepreneurs on one hand, interacting with future technologies and designing the future of experiences in-car and outside of the car, I think that’s incredibly exciting. So I have no problem getting out of bed in the morning.