Comcast ranked No. 4 in U.S. as corporate backer of start-ups
An early backer of Dollar Shave, Comcast Ventures now has invested in more than 100 U.S. startups, putting it ahead of venture funds run by Qualcomm, Cisco, GE and Bloomberg. Could there be another dot-com bubble? Maybe, experts say.
When Europe's Unilever paid more than $1 billion last year for the e-commerce start-up Dollar Shave Club, selling discounted men's razor blades, the hurrahs could be heard as far as the Comcast Center.
That's because Comcast backed Dollar Shave in an early funding round. The monthly subscription service for fresh razors — with the slogan "Shave time. Shave money" — exploded to three million customers in 2016, from 250,000 in 2012.
And now Comcast Ventures has stakes in two more e-commerce start-ups: Instacart, an "Uber" for home grocery deliveries, and the online dollar store Hollar.com.
So much for boring cable ventures at the nation's largest cable-TV company.
Six years after deciding that it wanted to be a bigger part of clubby Silicon Valley, Comcast has become one of the nation's biggest corporate investors in young tech firms, even as some fear that a new tech bubble could be forming with the soaring stock prices of Facebook and Google and the super-high valuations for private companies such as Uber and Airbnb.
The research firm CB Insights recently ranked the Philadelphia company's ventures unit as the nation's No. 4 corporate start-up investor since 2011, with stakes in 105 early-stage companies that carry a combined valuation of billions of dollars. CB Insights says that the only U.S. companies with more start-up investments are three Silicon Valley giants: Google (286), Intel Corp. (207), and Salesforce.com (124).
"You need people on the street talking to entrepreneurs who are making these changes," said Amy Banse, the longtime Comcast executive who heads Comcast Ventures. She notes how internet and digital technologies are transforming daily life and the economy. "We are witnessing a change that is as fundamental as the Industrial Revolution, and we are in the first or second inning of that."
The first criterion for Comcast Ventures to make an investment into a start-up is whether it could earn a substantial return, she said. Comcast Ventures then considers the strategic or commercial relationship with Comcast's cable division and NBCUniversal entertainment unit. Comcast does not disclose its total investment in start-ups or its returns.
A former Philadelphia lawyer, Banse, 58, calls Comcast Ventures — with offices in Palo Alto and San Francisco, as well as Philadelphia (55th floor of the Comcast Center) and New York — the "Lewis and Clark" of Comcast, watching out for emerging trends and business models. Comcast Ventures professionals speak to about 2,000 to 2,500 start-ups a year nationwide and take stakes in about 20. Its portfolio includes four Philadelphia-area start-ups: the pet-services firm PetCoach, the consumer-data firm Jornaya, the health-care concierge service Accolade, and the student-loan lender College Ave.
Big corporations have turned to start-up investments as they seek to bring innovation to corporate bureaucracies, experts say. Comcast faces particular challenges with on-demand streamers draining away cable-TV subscribers and making its video services popular with millennials and teens.
"If you can't beat them, then join them or at least buy a piece of the action. That is what Comcast is doing," said Robin Feldman, a professor and director of the Institute for Innovation Law at the University of California Hastings. "If you can't do it in-house, find a way to be part of the wave," she said, adding that "big is not always a good environment for innovation."
Saikat Chaudhuri, executive director of the Mack Institute for Innovation Management at the Wharton School, said that big corporations realize that, strategically, they have to emulate start-up companies or invest in them. "It makes absolute sense for a company to get into many areas to have options," he said. Comcast could invest in 50 start-ups but find that three of them are useful for its business. It can buy those three and sell or exit the others.
"We are in a boom again," Chaudhuri said of corporate money flooding into start-ups. "This is not too different from the late 1990s" with the dot-com bubble. "It's another gold rush. I anticipate that at some point there will have to be a correction."
But this boom seems more broadly distributed across sectors than it was in the late 1990s, when billions of venture capital poured into two sectors: the internet and information technology. Now there are multiple sectors — from health care to autos to computers — receiving an influx of venture funds, Chaudhuri said.
Comcast Ventures splits its investments into four categories: advertising, consumer, enterprise, and infrastructure. Areas of interest for future investing are the self-driving industry, futuristic online payment systems, artificial intelligence, and direct-to-consumer digital businesses, Banse said.
Rick Prostko, a Comcast Ventures managing director, worked for two other venture-investing firms in the San Francisco area before Banse recruited him to Comcast in 2012.
Prostko heard of Dollar Shave from an incubator fund in Los Angeles. He liked the company's passionate executives, though Prostko wasn't thrilled with Dollar Shave's business competing against such entrenched incumbents as Gillette and Schick.
The more he looked at it, though, the more he thought something could be there: The monthly subscription service regularly delivered fresh and discount-priced razor blades to men. Early Dollar Shave customer data also showed that few men dropped the subscription service after ordering it — indicating a low churn.
Comcast Ventures took a position as the largest new investor in Dollar Shave's "B series" of venture financing in 2012. Comcast has not said how much it made on Dollar Shave. But Prostko said it was "a vindication" for him.
"Not only did we realize a nice return," Banse said. "We learned a lot in the process, which we are using to invest in new direct-to-consumer products and services."
Such as Hollar.com, the online-dollar store that the Wall Street Journal last week named as the No. 1 young tech company to watch in 2017. "It's one of the fastest-growing e-commerce companies I have seen," Prostko said.
Top Investors in U.S. Tech Companies, 2011 to 2017
Google Ventures, 286
Intel Capital, 207
Salesforce Ventures, 124
Comcast Ventures, 105
Qualcomm Ventures, 93
Samsung Ventures, 60
Bloomberg Beta, 52
GE Ventures, 51
Source: CB Insights
Comcast owns a stake in 105 different tech companies. Here is a selection of those companies, provided by Comcast:
Dollar Shave Club