E492 | Zack Weisfeld, Ignite Deep Tech: Reinventing Corporate Venture

0:00Why did investors and a government fight to save one accelerator? Most corporate accelerators fail because in most cases it's a transaction. Ignite is what they call the co-founder as a service model based on three pillars. Trust, empathy and transparency. But when Intel tried to shut it down, something unprecedented happened. When Intel announced that we're winding down investors and other players, that this shouldn't happen because Ignite has built a very strong presence in the deep tech scene. What makes Ignite different? The secret is invisible. Each startup gets a corporate venture that builds a small army of four to five people inside the corporate to help them.

0:37Why we're not using this technology? This wasn't just about helping founders. It was warfare. Greg Lavender, he said, Zach, you know, part of your rule is to make it uncomfortable for others. Ignite was one of that culture change agents. The results speak for themselves. 35 % of our companies has done something with Intel. POC, licensing, acquisition, investment. But for Zach Weisfeld, success demanded something more radical. I had so many founders completely collapse in my office. And I went through, did another master's in psychotherapy. How do you turn a corporate into a co-founder? Join us for this deep dive into the future of corporate venture building on the European VC podcast.

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2:21and a liar. This is a union of values. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Welcome back everyone to the European VC Podcast. Today we have another one of the deep dives where we're diving deep on the intersection point between corporate startups and venture. And for that, we, of course, have Yapa, our in-house expert on everything CVC, to help us in a deep conversation with SAC Weisfeld from what you used to know as Intel Ignite, which is now fully Ignite Deep Tech. And you'll all understand that.

3:02I am saying specifically here in the introduction of SAC, Intel Ignite as well, because we, of course, all in the European ecosystem have known Intel Ignite for so long. And it's been a bastion for deep tech founders and for accelerator models for the tech ecosystem here. So I wanted to really give that context so we all understand that the size of the persona that we have with this here, Zach, because you were one of the founding partners of this, if not the founding energizer. So Zach, tell us everything about where we are today. I won't go into a bunch of details about what's happening with Intel because that's not on you to tell the world about, but rather tell us the story of Ignite Deep Tech as it is called today.

3:46Great. So thank you very much for having me. And this subject is dear to me because I've been an entrepreneur most of my life for 30 years, built companies, 80 years in Silicon Valley, the rest are in Israel. But the last 14 years being focused on reinventing large corporate technology multinationals, tour the work with startups. So I've started before the Microsoft Accelerators, Bangalore, Beijing, Shanghai, Berlin, London, Paris, Seattle, Sydney, and Tel Aviv. Then managed Microsoft for startups, 110 countries. And then later on, Bob Swan, the former CEO, now two CEOs ago of Intel, asked me to join and build Intel Ignite, which was the startup engagement model for Intel for Intel outside of our very successful long 30-year venture fund, right?

4:39So to what you pointed as an update, so as Intel, I think no news to anyone listening. I think if you haven't been under a rock for the past few, a couple of years, you know that Intel is going through probably its toughest time in history. I think 22 ,000 employees later that had to go and a big reduction in force and refocusing of the company. The company also announced that many of the programs as Intel Ignite will be winding down and also even announced that our corporate venture fund is going to be spun out of Intel as part of, again, focusing on the core business. By the way, some of it may change.

5:28We have a new CEO. He's actually coming from the startup ecosystem. He's a big investor in startups. So things may change. But as for now, this is the picture. So what happened was when Intel announced that we're winding down, or actually before we announced it, leaked out, we got a strong message from investors and other players that this shouldn't happen because Ignite has built a very strong presence in the deep tech scene across multiple countries. and especially what happened in Israel is first as the message came out, I think Bessemer was the first one to send a message that said, this is a big damage to the ecosystem.

6:14No one is taking Deep Tech the way that Ignite has been taking Deep Tech and Deep Tech founders and helping them actually create companies. They wish that there is a way to do something about it. And then Deep also wrote to the government. So it was nice to see how the government stepped up and said, no, this is not your decision to shut it down. This is too important. We'll help fund it. And then Pat Gelsinger, the former CEO of Intel, supported it and came in as the first customer for what's now known as Ignite Deep Tech. So Ignite Deep Tech, Israel at this point, is a standalone program that works with corporates to do venture integration, venture creation and acceleration with deep tech companies.

7:07It's funded partially by the government and partially by Intel, and we're negotiating with multiple other corporate partners to co-fund the program. It has basically three pillars to it. One is what many people, as you are familiar with that in Europe as well, is the seed program. So we're taking companies at seed stage. So yesterday we started our first batch of Ignite Deep Tech, actually kicked off. And the average funding of a company in that batch is$7.2 million. That's a nice size of a seed. So that's the flagship program, 12-week, super, super intense, helping startups build great companies.

7:51That's the seed program. Then we have the pre-seed program, twice a year, six months. It's a subset of the seed program. It's more like what people call accelerator. So it's people that raise up to a bit a million dollar, maybe a bit more, a little bit less. And we help them. They sit with us and we do part of the seed program. And then we have a program that's called leadership of deep tech startups. So this is even in the ideation space. We have professors, people from corporates, people they know that want to build a startup in the deep tech space, but haven't never done that before. We actually help them with the first stages in ideation and venture creation.

8:36So these are the three things we do. And again, it's now outside of Intel. Ignite Deep Tech. It is, you know, in my world, it's the founding father of accelerators. You have listed the three elements of the program. Can you talk a little bit to the success of it? Because it is so difficult to do. Why have you been successful in building this? It's a good question. And I'll point to a super interesting research that I'm actually waiting to see it published. I have only the final drafts of it. And it's a research that was done by the Bayes Business School in London, and they researched the corporate accelerator phenomenon.

9:14Well, I've been playing this game. I've been crafting this art for 14 years. And actually, by the way, March, so exactly 20 years ago, Y Combinator started the whole acceleration phenomenon, right? Exactly 20 years in March, actually 20 years ago. And then a bit later, I did my own version of the corporate acceleration piece. So when you go and read the research, and again, hopefully published soon, they come to the conclusion that most corporate accelerators fail. The reason that they say it fails, because in most cases, it's a transaction. The corporate makes a transaction with startup. And usually these transactions are very short-lived, right?

10:00I'm going to do something for you. You're going to do something for me. You're going to use my technology. I'm going to help you with putting you on my marketplace or something like that. but these are usually very short-lived. What they found out about Ignite, and they did a fairly decent level of research, I think 1 ,000 pages, talking to startups, talking to mentors, talking to my managers at Intel, and even going back to the Microsoft days, they figured out that Ignite is what they call the co-founder as a service model based on three pillars, trust, empathy, and transparency, which is very non, And why would the corporate go and do something like that?

10:40It doesn't make sense. Why would we be all about startups and not about the corporate needs? It's a business, et cetera, et cetera. So again, in these 14 years, the things I've learned that makes this model, I think, a success. And by the way, I've accelerated so far. I've had 107 batches of startups going through my programs, 967 startups that raise more than$30 billion, right, totally in programs that I've managed. The reason that this had that success and so many unicorns, et cetera, is few things must happen for these programs to be successful. But one, it has to be managed properly. Well, first of all, it has to be sponsored properly.

11:30In Microsoft, my sponsor was Satya Nadella when he was the head of the server and tool division. And then when he moved to be the CEO, it was Scott Guthrie that runs Cloud and Enterprise, right? So these were the people that sponsored the program. At Intel, it was Bob Swan, the CEO, that actually asked me to start the program. And then after that, I'm still reporting to Greg Lavender, which is the CTO of Intel, right? In transition, but still the CTO of Intel. So you have to have that executive sponsor that's willing to give it everything it needs to be successful. Second, you have to have it funded properly, proper funding model, because this is not a marketing program that may go away in a year.

12:18It has to be fully funded. It can't be based on sponsorships of accounting firms and law firms and banks or whatever. It has to be funded properly as a strategic tool by the corporate. And the third thing, and this is where a lot of these fail, it has to be managed properly by founders. So a lot of corporate programs that I've seen are managed by either a super smart, nice MBA, graduate, a great program manager, but doesn't fit to run a program like this because lacks the experience and the network. Or it's ran by an old timer, someone that comes from the corporate, and maybe that's their last job, or maybe they just know everyone and they like to play with innovation, et cetera.

13:05And again, I don't want to offend anyone, but these are not the right types to make these programs successful. If you look at all the people I hired through Ignite, they're all serial entrepreneurs, people that build companies, hired, fired, raised funding, exited, failed with the startups, did all these things. And these are not easy people to hire into the corporate. So all of this, you know, I get some of the things that I have found super difficult when working with big corporates, having the sponsor part. Right, right. So leadership, top management, all understand what's going on, right? The brain is functioning, right?

13:45But the body that is the culture of the corporate tends to fight it, right? So how would you work with that part? Yeah, you're absolutely right. Part of the reason we get a lot of interest now, even as a standalone entity, is because our success rate in engaging within the corporate is phenomenal. So 35 % of our companies has done something with Intel. POC, licensing, acquisition, investment, which is, you know, usually it's less than, you know, it's a handful of, you know, it's low than 10 % the percentage of integration. One of the ways that we figure out to do this is through the mentorship program.

14:30So each startup gets an industry mentor, which is a serial entrepreneur, someone who built companies before, so the mentor for the CEO, how to build a startup. But then they also get the corporate mentor. That corporate mentor, the lead mentor usually builds a small army of four to five people inside the corporate to help them help that startup. And on a weekly basis, they work with a startup and help them be successful. This is the specific, one of these secret sauces or the magic that does a couple of things. One, you're not trying to sell, a startup is not trying to sell to the corporate. So if you're going to try and sell to the corporate, you're going to have all the reasons why the corporate is not going to buy, right?

15:13They don't have the right support infrastructure. No one ever tried them before. They're going to fail. The IPs, whatever, lots of reasons why it's not going to work. When the mentor is looking at this, they usually start to work with a startup, and then they go back and say, hey, why we're not using this technology? It's super cool. And they have their networks and they have relationships inside the corporate and they become these internal champions. And suddenly it's not about the startup trying to sell into the corporate. It's someone within the corporate say, hey, there's a super cool technology.

15:44Why are we not trying it? It's a very different way to approach that corporate integration. The second thing, if you read the mentorship, so I had a meeting with my, so Greg Lavender, the CTO of Intel, I met with about 20 of the mentors. One of the mentors, for example, an amazing female technology leader said to him, look, my 20 years at Intel is divided to 18 before Ignite and two years since I've been working with Ignite. I'm a better manager. I develop better products. And for the first time in my life, in my professional life, I actually understand markets better than ever before because now I'm sitting in the forefront with the startup and trying to understand what's going on.

16:29It's not what I used to see when I was just working at Intel on these super important product lines. So there's all these little secrets of how to make that work. Not easy. None of it is easy. Has there ever been any incentive programs ready for these corporate mentors, or do they just volunteer to do this on top of their other 25 KPIs for the year? It always starts with the conversation is, I don't have time. I have too many other things to do. I don't need a bunch of these kids, you know, that I have to mentor, et cetera. I don't have time to this. And especially if the company is shrinking and you have more responsibilities.

17:08The minute that they try, so by the way, the first batch, second batch is hard because no one jumps on it. A manager will have to go and tap someone on the shoulder and say, try it out. It's going to be an interesting experience. And from that moment, you can't stop them to come back. And they want to come back every batch again and again because the learning is unbelievable. And they now become part of a success of these great companies. Now, because of the kind of success rates we have with the Ignite company, so batch one, for example, in Tel Aviv, the return rate of that batch was 6.2x. There's almost no VCs that return 6.2x, right?

17:50They are now telling their friends and colleagues that they are a major part of this startup that everyone now knows and people are excited about, et cetera. And they love it. They love it. That's the time of the week. They actually really enjoy more than their 25 other KPIs that they have to do. So it really becomes that shiny part of their week. But then let me pop another question to you, right? Because that is then one side of the equation, right? What you have been able to deliver to the corporate mentors are then the exciting startups. How have you found those? So I'll give you an example from, again, the batch that just started yesterday.

18:35So almost every Ignite batch across the world, we get about 250 applications that apply for 10 seats in a batch. With about 100 of them, we'll have an engagement. About 60 will go into the diligence process. About 20 will go to a final selection day. So this is a three-month process. Final selection day is about 20, 15 to 20 companies. they see six different judge groups. So it's about 140 judges. Half of them will be corporate. Half of them will be VCs and entrepreneurs. Each startup will see two separate Zoom rooms or physical rooms for 25 minute pitch in each room. And eventually we'll offer 10 companies to join the program.

19:22So that's a pretty rigorous selection process. And I think because of the experience and because of the success that Ignite had so far, about 70 % of the companies are actually referred through top investors. So it's very different than usual accelerators, right? But if we go back to 2010, 2011, when you started, right? Yep. So it seems like you have built a model that really works now for finding the right startups, but going back in time, are there any learnings that you can pass forward to others of how to do this, right? You said it needs to be, you have to go through a couple of patches, you have to see a lot, anything you got right in the start?

20:03Tons of learnings, of course. When I started the program, I was upset that I wanted to have a venture fund connected that I could actually invest in the company they bring in. And there was a big negotiation piece between myself and Microsoft Finance of getting that fund going. And they wanted me to fund like 10 people in finance to make it working. And eventually I didn't have that. And that was one of the best blessings because not having to invest in that cohort and take equity actually brought me better companies that didn't want Microsoft on their cap table and didn't want a small investment for a certain percentage which they didn't know what they're going to get in the program.

20:51So this is one of the things that I didn't know originally that's going to work out and worked out really well. Second thing, and by the way, Intel, the mentorship program worked much better than it worked at Microsoft. And I didn't think it's going to work out because I thought these old timers, these Intel guys, how can they help startups? I was dead wrong. And actually, the head of Intel in Israel, a guy called Yaniv Gardi, made it. He said, Zach, no, I'm not going to let you do this program if you're not going to have a deep internal mentorship going. And he was super, super absolutely right about that.

21:29And that also has been one of these significant, unique things I've learned. So I'm going to give you an example of a small company that we had doing in the security space. Think of what does it mean, a company that your first customer has 180 ,000 clients that you're going to protect, and this is your first customer, and it's Intel. Every company next that you're going to sell to and every investor, the conversation is different when you've gone through the unbelievable hard selling process into a company like Intel and you now manage 180 ,000 endpoints. It's very significant and many stories like that.

22:13So there are a lot of learnings. It's fine art. And it took me 14 years to get to the point of actually knowing how to do that. But I think also the way that you explained that, right? What you have created is batches of startups within the deep tech space that are going out into the venture ecosystem, not having ruined their cap table, right? They are getting out there and ready to play, right? Yes. And also, the other thing is because of the kind of team that's built inside Ignite, they understand venture, they understand market, they understand they've done that before. So we're in a very unique position to make significant impact, even to the point I can tell you I had multiple experiences where I had a conversation with the CEO of a startup saying, you do not fit to be a CEO.

23:07you're a great technologist or you're great at selling, if the startup is important for you and you own most of the stock, you should be president CTO or president CRO. Let's bring someone else to run the company because this is not your strong suit. Now, because of the unique position I'm in and I'm not on the board, I'm not an investor, their success is my success. I'm a founder first kind of approach, I can actually do that with the founders. So we go into everything, technology product, go to market, mental well-being of the founders, founder relationships, their relationships at home, because it's a significant thing about their life.

23:53So we deal with everything. Now about the go to market, we've created a program called CAB, Customer Advisory board where we took Fortune technology leaders of Fortune 500 companies, CTOs, CISOs, CIOs. We have the CIO of Intel, Motifiklstein, as the chairman of that group. And we meet with startups and that group in New York once in a while to create business opportunities. We don't forget it's all about the business at the end of the day. We can create some super cool deep tech technologies. If there's no business at the end of the day, it doesn't matter. Right. So, yeah, there are multiple components to it.

24:37But the key is I understand I used to run startups. My managing directors understand they used to run startups. They know it's important. We don't waste the time of the founders on things that are useless. On the other end, we try to keep the eyes on the ball and what would make them successful. If they're not successful, the corporate gets nothing. So this is why it's all about them. And then it goes back to us, to the corporate. I have a reflection on a former part of my career and a question that I'd love to ask both of you. I used to run a student incubator, which interfaced both to researchers and students.

25:17We kept working hard on getting the local business environment and the corporates involved in the work with the founders. And here I say founders slash students slash researchers. And I am sitting here throughout this conversation thinking back to something you said in the beginning, which was that the atomic unit of these programs are always the founders. Also, of course, all the internal stuff inside the program. But if the founder quality is not there, the program will inevitably die. It just will not work. It will not yield the results. When I think back to what was being done there by the university and the incubator, and in consequence, what happened to the corporates that engaged, because the quality was not there, because they were not handpicked as you described it, the majority of your founders came to you by reference by VCs.

26:20That is significantly different from the majority of the founders getting into a program being people that get ECTS points for taking part of a course where they have to do some project and a report to a local corporate that for some reason thinks that we probably should do this and they put a middle level management. Or sometimes it's even quite senior management that's involved in this program because we're doing a bit of an innovation theater, I think, by telling everyone this is important. These are founders. These are blah, blah, blah. And in fact, they haven't quit anything to do their thing.

26:59They are not intending to go full time with the startup. And thus, you just end up blowing it completely. And I'm kind of taken back to thinking about how I talk to angel investors often when I say you all as an angel tend to want to find a diamond in the rough and help them out with all your experience. But your first investment, you typically want to find the diamond that's already found by others. And you tag along and get to see what an excellent founder and an excellent journey looks like. and you put your money with a bunch of those. And then as you grow in competence and skill, you start investing more on your own.

27:39Is it a similar dynamic when it comes to corporate venturing or corporate interfacing with startup land and whatever model you do, that you oftentimes see corporates building things up from the ground up and thinking that they should find the diamond in the rough and can do it all by themselves, so to say, meaning they don't tap into the existing venture landscape sufficiently and recognize that the top founders are almost the only ones that will truly give you what you want. I think when corporates look at these hackathons with students, it's more of an exercise on more of an HR hiring. We want the brand to be existent there.

28:25It's not about finding the best entrepreneurs. I don't think that's the case. I don't think anyone thinks they're going to bring the best startups out of that, these kind of engagements. And I think most cases is corporates are late to the game because they're trying to find these startups way late, right? When there's already credibility and validation for what they do. And because this is the way they used to work, I think, inside corporates. And there's a lot of NIH, et cetera, et cetera. I think the current model we build, we have these three layers. We have the deep technology leaders, which are professors, corporates, people that come with technology.