LG and the hunt for the next-gen corporate incubator

Whatever you do, don’t refer to LG’s incubator program LG Nova as a corporate venture capital (CVC) outfit.

LG Nova is the pointiest tip of the spear for LG, the company’s experimental playground to work with startups to explore spaces where the corporation has spotted 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, LG’s corporate SVP and head of the North America Innovation Center — LG Nova among friends. The interview is edited for clarity and length.

“Are we a CVC? The answer is no. Hell no,” Rhee said. “CVC, as you know, is a venture capital play. Their ultimate goal is to have a high return. Because of that, they invest in companies with the potential to grow the market value. We are not that; we invest, and while we care about the growth of the companies, we look at much more about how the business we can create together will grow. But if there’s potential to grow the business with us, and if that company has something that we need to grow our business as well, then 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 one part of that. We are much more interested in creating joint businesses and joint ventures. For some companies, we may even make outright acquisitions. CVC is very much a financial play; we are more a business creation play.

“LG Electronics is one of the largest manufacturers of appliances and so on. We’re doing very well, and we also want to look at the future, specifically at areas that we believe are ripe for future growth, areas where LG aren’t necessarily operating today. LG Nova is for areas where LG wants to grow, but we aren’t yet. Last year, we established this center to find out what those things are and grow new businesses in the new future growth areas.”

The team came up with five different areas of focus, explicitly targeting aspects of the market where LG can leverage its platform and ecosystem strengths while extending its innovation reach. The areas are digital health, the metaverse, EV infrastructure and “smart lifestyle.” The latter is an extension of smart homes, home automation and living smarter through the power of tech. In addition, LG Nova highlights an overarching mandate to look at representation across all the categories it serves.

“We look for things like helping under-served communities and products and services that can make an impact in communities to improve quality of life,” Rhee explained. “Corporate innovation has happened before, but a lot of them started internally. You take a lot of R&D centers and innovation initiatives, and you spend a lot of time internally in the lab to create something new, innovating within existing structures. We are looking at a very different perspective — we are doing what we call outside-in innovation. LG Nova doesn’t have R&D capability, and that is done intentionally. We have some engineers, but we won’t be building entirely new innovations internally. Instead, we want to encourage outside entities — startups and so on — to propose the ideas and work with LG Electronics in this new future growth area. We want to figure out how we can create new businesses together.

“When I say new businesses, that can mean a lot of different things. We are willing to create a new business unit if the idea, suggestions and partnership hit a home run.

So far, that 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 corporate accelerator mix. Implementing how it works with its startups is far broader than the “write a check and hope for the best” and “here’s some customers, good luck” approach that many of the other corporates are taking.

The process and the benefits

LG Nova has started finding its feet, starting off with a funneling process it’s calling the Grand Challenge program. It started with a competition launched back in September, which it calls the “Mission for the Future,” which was met with a lot of interest from startups; LG’s team tells me it received over 1,300 proposals from more than 100 countries.

LG Nova differs from many other incubators because it isn’t taking the corporate venture capital approach of investing, nor is it looking for technology proposals. Instead, the incubator is looking for submissions for how startups want to bring their products to market by leveraging the reach and impact of LG Electronics.

From the 1,300 proposals, they make a shortlist of 50 or so companies. At this point, each of the companies is assigned an entrepreneur in residence (EIR) who will work with the startups to flesh out the ideas and put together a proposal, figuring out what the potential synergies are with LG’s larger-picture strategy and the strengths and opportunities brought by the startups.

“Together with our team, we will create a plan, which isn’t just the startup’s business plan, nor is it only LG’s business plan,” Rhee said. “The idea is to put together a joint strategy and fund a proof of concept, a minimum viable product, or an initial concept to implement that joint business plan.”

Later in the summer, LG Nova is aiming to pick 10 of the proposals as final winners; that’s when the rubber hits the road. After that, LG might start a new business with the startup, create a joint venture or make an equity investment. It could also involve a commercial agreement between the startup and LG, or — in some instances — LG might propose an acquisition if they believe that’s the best way to stand up a new business.

“There are different levels of benefits available to the companies as they get further and further in our competition. Once they are selected as top 50, the first thing they’re going to do is they’re going to get a dedicated champion from LG Electronics. When they’re chosen down the top 20, we are funding a POC or MVP [minimum viable product], probably in the $100,000 to $200,000 range. Once a startup is selected as one of the top 10, we allocate money. Here, the pot is $20 million to invest and help grow the joint business ventures we come up with. Surprisingly, what we found is there’s a lot of companies out there that say they don’t need our money. They need a collaboration plan with LG Electronics, how to leverage LG’s distribution, how to leverage LG’s existing home market, and so on.”

Behind the first few companies

LG Nova announced the first nine companies during CES last week, and I spoke with Rhee to get a deeper understanding of how these startups are representative of the program. The key thing LG Nova is looking for is not necessarily a financial return; the accelerator wants to spin up new businesses and business units.

“We are of course selecting companies based on their quality and potential and so on,” Rhee noted. “But you know what? The biggest thing that we select the companies on is their potential to create new businesses with us. So the company may be very successful, [the product] may be very successful, but can we be successful together? Is there an intersection? Is there any common denominator that we can think about? So that is an important factor. The companies we’ve selected so far are not necessarily examples of the companies that we are interested in. It’s really how we’re going to create joint businesses together.”

I spoke with Rhee to get a glimpse behind the scenes and figure out why the companies LG Nova announced are important.

“Connected healthcare is a huge area for us. We announced two companies that we are backing in this space — one is called XRHealth. It combines healthcare and metaverse at the same time. They provide physical therapy training through AR/VR in the metaverse world, but with a very specific goal to improve the health and actually improve the condition of the patient. We are going to establish a few service centers with them across the United States as a pilot, so that’s what we’re trying to do in the next few months.

“Maya MD is a digital human AI health assistant that’s going to combine with LG TVs. And obviously, we have a lot of TVs out there, install base and so on. So we are bringing their technology into the home. These early companies still need to do a proof of concept, so they may not actually be rolled out as a real business. We are still in the evaluation phase. But the point is we want to actually do some sort of pilot or minimum viable product to figure out whether they actually work for us.

Beyond healthcare and AI, the accelerator is looking at the metaverse, but it assures me it is looking beyond the buzzword du jour.

“You’re probably tired of hearing about the metaverse every day,” laughs Rhee, eliciting an honest nod from your correspondent. “I am sailing in that same boat. But what I believe is that the metaverse itself is very specific. It could be a buzzword, and it could dissipate at some point. Nonetheless, I am a firm believer in virtualization. We’re going to expand or extend the physical world.”

LG is particularly interested in what the metaverse can do to the real world — and vice-versa — and claims the startups highlighted in the metaverse category helps illustrate that goal.

“We picked these two companies — I3M and iQ3. The latter provides a metaverse platform to train technicians and engineers in the real world. You’re not just doing something in metaverse, you actually help the technicians, too. A lot of companies, especially industrial companies, need to train engineers and technicians before you put them in the factory. As a company — as LG Electronics — we want to work with them to do it in the electronics area. I3M is another company which is a little bit different. They actually tweaked the travel and tourism world. If you want to go to Africa, you can experience Africa in metaverse before you go there. It is a combination of the travel industry and in-home experiences.”

LG has long had a significant footprint in commercial, industrial and residential electric panels and systems. The company is keeping a close eye on what is rapidly becoming the biggest energy hog in our homes: electric vehicles.

“EV is huge and mobility is huge, so we are taking a focused approach — we are specifically looking at EV infrastructure. We have selected a couple of companies doing interesting stuff. SparkCharge brings a battery charger to where you park so you don’t have to find a parking spot. When you’re doing street parking every night, they bring this charger to you, instead of you going to them. And LG has been creating a pilot device at home. We have a lot of at-home market penetration, so perhaps we can combine that with this device.

“Our other company in this space is Driivz, and it is a little bit more of an operating system play. They essentially make an operating system/platform for EV charging and energy management between buildings and charging stations and so on. We are curious to work with them because LG also has a lot of energy business.”

The final slice of the LG Nova puzzle in its first incarnation is the broader category of Smart Life. Between its televisions and other home appliances, LG has products in millions of homes across the U.S., and is aiming to leverage that foothold for a deeper grasp on our hearts — and our wallets.

“The Smart Life category is an expansion of the smart home. Everykey is a smart key technology that can log into LG ThinQ platform without actually typing passwords. I also want to talk about a.kin a little bit — it’s such an interesting Australian company. They make AI technology that can be combined with the ThinQ platform that LG has, but they’re specifically targeting helping out homes with high-needs people. So for example, if there’s an elderly person or a kid who needs additional assistance or more help than usual, the whole family has to take on more work than usual by scheduling or bringing someone to school or other places. A.kin is helping streamline the whole process. Imagine you have someone who has a neurological disease, for example. When they go to school, kids need help everywhere. If you look at the calendar, parents or caretakers have to do something for them every five to 10 minutes. Akin is the first smart scheduler for those parents. It’s not only a scheduler – the company can understand the need of the households and can automatically make suggestions and proposals for them.”

How the big LG Nova experiment will evolve

Even in my line of work, where I chat with startup founders day in day out, it’s rare to talk with people who genuinely get filled with a child-like excitement about their work. Gesticulating wildly at the camera and brimming with ebullience, toward the end of my conversation with Rhee I just had to ask him: What is it that has him so excited about living at the intersection of startups and the corporate behemoth that is LG?

“Why am I so excited?! There are a lot of competitors in this space, and they’re all using traditional corporate innovation methods. They invest, they somehow have an innovation program and do some M&A. They all do that — but are extremely fragmented. They invest in one company, they acquire another company, work with a third company, or invest in a different company. My belief is that’s a shotgun approach. And that’s why we designed this unique process. I am a risk-taker, and we will be very successful because we’re streamlining the different components and focusing on creating new businesses. This is an experiment at the end of the day — that’s why I’m excited.”

I did have a parting question for Rhee: Why does LG bother to do this in the first place? The company has tens of thousands of engineers who do nothing but R&D all day long — why bother with a startup-focused innovation program?

“We believe we have brilliant and bright people in our company. However, we also think there are many more intelligent people out there who don’t work for LG. When we talk about innovation, it’s not just innovation for the company; it has to be innovation for impact. That goes beyond LG. We want to create a world where one plus one equals three. That’s the philosophy, and that’s probably why this program is entirely different than other competing corporations or other companies. Virtually every large corporation only looks at its own innovation and benefit. I don’t blame them – but at the end of the day, if you look at the innovation for impact, you can see the potential of the whole world, not just your company.”

If you’re building a startup in the spaces LG is excited about, it’s not too late — LG Nova is planning to launch another challenge program before too long.

“We’re going to repeat this program as soon as we finish the current one,” Rhee said. “We will revise and refine the current program, adding additional tracks or sectors to what we have. If you are running a startup and want to learn more, reach out to us — we can help. July isn’t that far away, and we are already building up our plan for the next one.”