The Indianapolis-based venture studio High Alpha has created a new business line called High Alpha Innovation to bring its startup spin-up approach to big business.
So far the firm has managed to sign on clients like the financial services firm Silicon Valley Bank, the industrial manufacturer Cummins and the security hardware and services company Allegion.
Founded by the management team behind ExactTarget, the High Alpha studio shows how new technology ecosystems can emerge when successful founders reinvest in their local technology ecosystems. The venture studio alone has managed to spin up 24 new companies that have either been publicly announced or are still in stealth mode, according to Elliott Parker, who joined High Alpha as managing director of Business Design and Corporate Innovation in May of 2018.
And those companies have already raised $140 million in follow-on funding, Parker said.
Parker heads the new High Alpha Innovation business and has already launched one company in conjunction with Cummins, the startup Anvl, which coaches field technicians on how to be safer on the job when they’re working with big machines.
“We got really good at this venture studio model and big companies started to reach out to us,” said Parker of how the new venture got started.
Unlike accelerator or corporate venture programs that find external companies to invest in, Parker said that the High Alpha Innovation model was really about working with corporate partners to spin up businesses internally and in a collaborative way. “We are starting with problems that the corporation is facing and we’re building our own luck in a way.”
Not every collaboration between the studio and the corporate partner ends in a new business, Parker said. “A lot of times in these partnerships many of the ideas that we identify and develop along the way are transformed into a new product or service. Maybe 80% are product and only 20% are equipped to be a startup,” he said.
High Alpha receives a small amount of funding to manage operations with its corporate partners, but most of the compensation comes in the form of an equity split between High Alpha Innovation and its corporate partners in the startups that get built, according to Parker. Both the sponsoring corporation and High Alpha split the equity stake after a share allocation is made for founders and employees for the startup, Parker said.
“High Alpha Innovation is taking our venture studio playbook and applying it to innovation challenges within the world’s largest organizations,” said Mike Fitzgerald, partner at High Alpha, in a statement. “This is a major expansion opportunity for High Alpha as we serve our corporate partners and look to scale the studio model across different industries and geographies.”
“For over 35 years, Silicon Valley Bank has supported the innovators and entrepreneurs that invent the future,” said Melody Dippold, head of Innovation at Silicon Valley Bank. “High Alpha Innovation has been an important partner as we develop new ideas, solutions and companies together that will help our clients accelerate their own growth and innovation.”
Prior to High Alpha, Parker served as a principal at Innosight, a strategy consulting firm founded by the late Harvard Business School professor and best-selling author Clayton Christensen.
“Every innovation leader and executive I meet is trying to figure out how to work with venture studios or launch their own corporate studio,” said Parker. “We believe the venture studio is an ideal model for overcoming the ‘Innovator’s Dilemma’ and helping companies increase the quality and quantity of their innovation efforts through startup formation. Over the last two decades, we’ve seen an explosion of corporate venture capital investing. We expect a similar trend over the next decade with corporate venture studios and believe we’re uniquely positioned to help.”