Whatever you do, don’t refer to the LG Nova incubator program as a corporate venture capital (CVC) firm.
LG Nova is the sharpest point of the spear for LG, the company’s experimental playground for working with startups to explore spaces where the corporation 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 versions of the future.
Below is my interview with Sokwoo Rhee, Senior Corporate Vice President of LG and Head of Innovation Center North America – LG Nova among friends. The interview is edited for clarity and length.
“Are we a CVC? The answer is no. Of course not,” Rhee said. “CVC, as you know, is a venture capital game. Your ultimate goal is to have a high return. Therefore, they invest in companies with the potential to increase their market value. We are not that; we invest, and while we care about the growth of companies, we look a lot more at how the businesses we can create together will grow. But if there’s the potential to grow business with us, and if this company has something we need to grow our business as well, we’re going to invest and work with them. We will do a proof of concept (POC), putting our resources behind the company. And a financial investment is just part of that. We are much more interested in creating joint businesses and joint ventures. For some companies, we can even make outright acquisitions. CVC is very much a financial game; we are one more piece of business creation.
“You’re probably tired of hearing about the metaverse every day,” laughs Rhee, prompting an honest nod from her correspondent.
“LG Electronics is one of the biggest home appliance manufacturers and so on. We are doing very well and we also want to look to the future, specifically in areas that we believe are ripe for future growth, areas where LG is not necessarily operating today. LG Nova is for areas where LG wants to grow but not yet. Last year, we established this hub to find out what these things are and develop new business in new areas of future growth.”
The team presented five different focus areas, explicitly targeting aspects of the market where LG can leverage its platform and ecosystem strengths while expanding its innovation reach. The areas are digital health, metaverse, electric vehicle infrastructure and “smart lifestyle”. The latter is an extension of smart homes, home automation and smarter living through the power of technology. In addition, LG Nova highlights a comprehensive mandate to observe representation in every category it serves.
“We look for things like helping underserved communities and products and services that can impact communities to improve quality of life,” explained Rhee. “Corporate innovations have happened before, but many of them started internally. You take a lot of R&D centers and innovation initiatives and spend a lot of time in-house in the lab to create something new, innovating within existing structures. We’re looking at a very different perspective – we’re doing what we call outside-in innovation. LG Nova has no R&D capability, 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 outside parties – startups and so on – to come up with the ideas and work with LG Electronics in this new area of future growth. We want to find out how we can create new businesses together.
“When I say new business, it can mean many different things. We are willing to create a new business unit if the idea, suggestions and partnership work.
So far, this sounds like any other corporate incubator. Still, the devil is in the details, and LG Nova is bringing a lot of exciting twists to the enterprise accelerator mix. Implementing the way it works with your startups is much broader than the “write a check and hope for the best” and “here are some customers, good luck” approach that many other companies are taking.
The process and benefits
LG Nova has started to take hold, starting with a funneling process it’s calling the Grand Challenge program. It all started with a competition launched in September called “Mission for the Future”, which was met with a lot of interest from startups; The LG team tells me that they received over 1,300 proposals from over 100 countries.
LG Nova differs from many other incubators in that it is not taking the corporate venture capital investment approach, nor is it looking for technology proposals. Instead, the incubator is looking for suggestions on how startups want to bring their products to market, leveraging the reach and impact of LG Electronics.
Of the 1,300 proposals, they make a list of about 50 companies. At this point, each of the companies receives a resident entrepreneur (EIR) who will work with the startups to delve deeper into the ideas and develop a proposal, discovering what the potential synergies are with LG’s overview strategy and the strengths and opportunities brought by the startups.