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.

On stage announcing LG Nova’s launch — Sokwoo Rhee, LG’s corporate SVP and head of LG Nova. (Image: LG Nova)

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.