It is no secret. The appetite of more mature companies from all over the world to have a presence in Silicon Valley is increasing. The news is that the largest presence is from Asia and Pacific rather than from Europe, according to the last Report “Corporate Innovation in Silicon Valley. Outposts and Investment Flows” presented yesterday, Sept. 25th, at the San Francisco Scaleup Summit, part of the 5th edition of SEC2SV – Startup Europe Comes to Silicon Valley, the 1-week mission organized by Mind the Bridge with the support of EIT from September 23rd to September 27th in Silicon Valley.

“Japan is by far the most represented country in the Bay Area in terms of innovation outposts” – commented Alberto Onetti, Chairman of Mind the Bridge – Asia and Pacific rather than Europe are looking and investing into Silicon Valley. Though automotive is the most represented industry, corporates from many other sectors are scouting for innovation. That means that Silicon Valley is considered to be reshaping the future of almost all of the markets.”

The research outlines that out of the 222 large global companies* that have an innovation outpost in the Bay Area, 94 (39%) are from APAC region, versus 76 (31%) from Europe. 41 (17%) are from the rest of the US, 8 (3%) from Latin America. Other regions including Africa, the Middle-East and Russia have only a marginal presence (one outpost each).

31 countries have an innovation outpost in the Bay Area. 1 out of five corporates (21% of the total) belong to Japanese companies; 15% are from American companies that decided to have a direct presence in Silicon Valley; 9% are from France, 8% from Germany and China.
Notable is also the presence of UK, Swiss, Indian, and Korean corporations.

Corporates with innovation outposts represent over 20 different industries.
That said, Automotive is definitively the first in line (36 outposts, 16% of total) having an innovation center. The percentage increases to 20% if we also include Aeronautics & Space. Corporate behemoths (conglomerates, mostly Japanese companies, 61% of them) hold the second place in the ranking with 23 outposts. Telcos, Finance&Banking, Engineering&Electronics follow with 22, 21 and 20, respectively. Then we find IT&Software with 15, Biotech, Life Sciences & Pharma with 13, mostly as R&D Centers. Energy&Power, Oil&Gas, and Chemicals with 10, 8 and 6. 8 even for Insurance companies (4% of total).

The Report categorizes the 246 total Innovation Outposts into 4 types:

  • 34 Corporate Innovation Antennas: individual up to a small team of 10, performing trendspotting and startup engagement on an individual level
  • 66 Corporate Innovation Labs: acting as an incubator/accelerator powered by the support of corporate resources for out-of-house technology research and development
  • 70 R&D Centers: an extensive 50-100+ people team with dedicated vertical research teams
  • 76 CVC Offices, i.e. Corporate Venture Capital Office: an office of a venture fund set up by the corporate

It derives that 45% of the outposts are lean structures (Corporate Innovation Antenna + CVC Office) while 55% are more structured presences.

“Corporate Open Innovation in Silicon Valley is definitely booming – added Onetti – While R&D Centers have been the dominant model of presence until 2010, during the last decade we have seen a strong shift towards a leaner presence and the use of open innovation mechanisms. Labs and, more recently, Antennas have become more and more frequent.”

About 6 out of 10 outposts in Silicon Valley have been set up in the last 5 years, 8 out of 10 after 2010. Only 18% have been established before 2010 (and 7% in the previous Millennium). In parallel, more and more Corporate Venture Capital have opened an office in the Bay Area (60 in the last decade, versus only 11 in the prior 20+ years).

Talking about the size of the outposts, the majority (104, ~42%) involve very small teams (1-10 employees) while 32% (77 outposts) can count on between 10 and 50 employees. 17% are medium-size structures (50-250 employees) and 9% are large unit employing over 250 people (from 250 up to 1000+ employees). Mind the Bridge estimates an “army” of over 25,000 people deployed by corporates from all over the world in Silicon Valley with the goal of scouting or developing innovation.

“This report serves as our effort to combine the various research we have done working in and around the corporate venture and open innovation in Silicon Valley. In particular, we aim at advising corporate executives with the best possible and most updated data and analysis in order to inform their open innovation strategies and plans. – commented Marco Marinucci, CEO and founder of Mind the Bridge – In particular, in the last few months we have significantly expanded the reach of our research by widening the analysis to include corporates from all over the world and investment flows. We also added some useful cases to provide more color to the numbers.”

Silicon Valley, despite being a small area, is however not just a single hub. San Francisco hosts in fact the 25% of outposts, mainly Antenna, Labs and CVC Offices, confirming its centrality. Other top hubs are Palo Alto (12%, lots of which CVC Offices), Sunnyvale (11%), Santa Clara (8%, mainly R&D Centers), Menlo Park (7%) and Mountain View (5%), San Josè (13%, mainly R&D Centers).

“But the investment growth comes from outside the Bay Area – ended Martin Haemmig, Co-Founder / Network Partner Vidian Ventures / GLORAD, co-signer of the Foreword of the Report – The local CVCs are typically the largest investor by number of deals, while the foreign CVCs have been gradually catching up and eventually surpassed the Bay Area CVC investors by number of deal. The 2018 increase has been driven significantly by Rest of US CVC investors and slightly by Foreign CVCs.”

Consistently with the Corporate Innovation Outpost data, Japan is by far the largest (non-US) investor in Silicon Valley. In the period 2015-2018, Japanese CVCs backed 202 rounds with an overall deal value slightly below $25B. China follows with 158 deals and $16B value. CVC investors from Germany plays a relevant role with 80 deals and $5.8B invested. UK and South Korea CVCs are involved in a similar number of deals (90 and 79 respectively), but mobilizing a lower amount of capital ($2.9B and $1.7B). France, despite its capillary presence of outposts in the Bay Area, shows lower volumes of CVC investments (34 deals with $0.7B in deal value), while Switzerland is quite active (51 deals, $1.6B invested). On the contrary, Australia, Taiwan, and Singapore CVCs are very active, despite the fact they have not a large presence on the ground (8 outposts all together).

* Methodology
The study tracks worldwide top public and private companies that are ranked in the Forbes Global 2000 and/or Fortune Global 500 lists. For more information see Methodology.
The study is obviously not counting the US companies based in the Bay Area.