Whatever you do, don’t refer to LG’s LG Nova incubation program as a corporate venture capital (CVC) company.
LG Nova is the spearhead for LG, the company’s experimental playground for working with startups to explore spaces where the company has identified areas ripe for future growth. Backed by a relatively large and rapidly growing team and a healthy budget, LG Nova is rolling up its proverbial sleeves and exploring future releases.
Below is my interview with Sokwoo Rhee, LG’s corporate SVP and head of the North America Innovation Center – LG Nova Among Friends. The interview is edited for clarity and length.
“Are we a CVC? The answer is no. Hell, no, ”Rhee said. “CVC, as you know, is a venture capital game. Their ultimate goal is to have a high yield. For this reason, they invest in companies with the potential to increase market value. We are not that; we invest and, although we care about the growth of companies, we observe a lot more about how the business that we can create together will grow. But if there is the potential to grow the business with us, and if that company has something we also need to grow our business, then we will invest and work with them. We will do a proof of concept (POC), putting our resources behind the company. And a financial investment is only part of that. We are much more interested in setting up joint ventures and joint ventures. For some companies, we may also make outright acquisitions. CVC is a very financial game; we are more of a business creation game.
“You’re probably tired of hearing about the metaverse every day,” laughs Rhee, eliciting an honest nod from your correspondent.
“LG Electronics is one of the largest manufacturers of home appliances and so on. We are doing very well and we also want to look to the future, particularly in areas that we believe are ripe for future growth, areas where LG does not necessarily operate today. LG Nova is for areas where LG wants to grow, but we’re not yet. Last year we set up this center to find out what these things are and grow new businesses in new areas of future growth. “
The team identified five different focus areas, explicitly targeting aspects of the market where LG can leverage its platform and ecosystem strengths while extending its innovation reach. The areas are digital health, the metaverse, electric vehicle infrastructure and the “smart lifestyle”. The latter is an extension of smart homes, home automation and smarter living thanks to the power of technology. Additionally, LG Nova emphasizes a general mandate to look to representation in all categories it serves.
“We look for things like helping underserved communities and products and services that can impact communities to improve the quality of life,” explained Rhee. “Business innovation has already happened, but many have started internally. Take a lot of R&D centers and innovation initiatives and spend a lot of time inside the lab to create something new, innovating within existing facilities. We are looking at a very different perspective: we are doing what we call outside-in innovation. LG Nova has no research and development capabilities and this is done intentionally. We have some engineers, but we’re not going to build entirely new innovations in-house. Instead, we want to encourage external entities – startups and so on – to come up with ideas and work with LG Electronics in this new area of future growth. We want to understand how to create new businesses together.
“When I say new businesses, that can mean a lot of different things. We are willing to create a new business unit if the idea, suggestions and partnership are successful.
So far, it sounds like any other business incubator. However, the devil is in the details, and the LG Nova is bringing many exciting twists to the business accelerator mix. Implementing the way it works with its startups is much broader than the “write a check and hope for the best” and “here are some customers, good luck” approaches that many other companies are adopting.
The process and the benefits
LG Nova began to find its feet, starting with a channeling process it calls the Grand Challenge program. It started with a competition launched in September, called “Mission for the Future”, which attracted a lot of interest from startups; The LG team told me they have received over 1,300 submissions from more than 100 countries.
LG Nova differs from many other incubators because it does not use the corporate venture capital approach to invest, nor does it seek out technology proposals. Instead, the incubator is looking for proposals on how startups want to bring their products to market by leveraging the reach and impact of LG Electronics.
From the 1,300 proposals, they make up a shortlist of about 50 companies. At this point, each of the companies is assigned an entrepreneur in residence (EIR) who will work with the startups to materialize the ideas and put together a proposal, understanding what are the potential synergies with LG’s broader strategy and strengths and the opportunities offered by startups.