LG and the Hunt for the Next-Gen Corporate Incubator

LG Nova: Beyond Traditional Corporate Venture Capital

It’s crucial to avoid categorizing LG’s LG Nova program as a typical corporate venture capital (CVC) entity.

LG Nova represents LG’s most forward-thinking initiative, functioning as an experimental hub dedicated to collaborating with startups. This allows the corporation to investigate emerging areas with significant potential for future expansion. Supported by a substantial and expanding team, alongside a considerable budget, LG Nova is actively exploring potential future scenarios.

An Interview with Sokwoo Rhee

Below is an edited transcript of my conversation with Sokwoo Rhee, LG’s Corporate Senior Vice President and head of the North America Innovation Center – LG Nova.

“Is LG Nova a CVC? Absolutely not,” Rhee stated emphatically. “Traditional CVCs prioritize financial returns. Consequently, they invest in companies poised for market value growth. Our focus differs; while we value company growth, we prioritize the potential for collaborative business development. We invest when a company possesses assets crucial for our own business expansion, and vice versa.”

LG Nova conducts proof-of-concept (POC) projects, dedicating resources to promising ventures. Financial investment is only one component of this process. The primary objective is to establish joint businesses and ventures, potentially leading to outright acquisitions. Unlike a purely financial CVC approach, we concentrate on business creation.

Focus on Future Growth Areas

“LG Electronics is a leading manufacturer of appliances and related products. We are currently successful, but we must also anticipate future trends, specifically identifying areas where LG is not currently active. LG Nova was established to pinpoint these opportunities and cultivate new businesses in these emerging growth sectors.”

The team has identified five key areas of focus, strategically targeting market segments where LG can leverage its existing platform and ecosystem strengths while simultaneously broadening its innovative capabilities. These areas include digital health, the metaverse, EV infrastructure, and “smart lifestyle.”

The “smart lifestyle” category builds upon smart home technology and home automation, aiming to enhance living through technological advancements. Furthermore, LG Nova emphasizes the importance of inclusivity and representation across all its initiatives.

Outside-In Innovation

“We actively seek opportunities to support underserved communities and develop products and services that improve quality of life,” Rhee explained. “Traditional corporate innovation often originates internally, with extensive R&D efforts within existing structures. We are adopting a different approach – what we call ‘outside-in’ innovation.”

LG Nova intentionally lacks extensive internal R&D capabilities. While we employ some engineers, our strategy centers on encouraging external entities – startups, for example – to propose ideas and collaborate with LG Electronics in these new growth areas. We aim to determine how we can jointly create new businesses.

“By ‘new businesses,’ we mean a wide range of possibilities. We are prepared to establish entirely new business units if a partnership demonstrates significant potential.”

A Different Approach to Incubation

While this may initially resemble other corporate incubators, LG Nova distinguishes itself through its comprehensive approach to startup engagement. It moves beyond the common strategies of simply providing funding or offering limited customer access.

Sokwoo Rhee, LG’s corporate SVP and head of LG Nova, announcing the program’s launch. (Image: LG Nova)

LG Nova is committed to fostering genuine collaboration and creating mutually beneficial partnerships with innovative startups.

LG Nova's Approach and Advantages

LG Nova is establishing its presence through a unique program known as the Grand Challenge. This initiative began with a competition, the “Mission for the Future,” launched in September. The response was substantial, with LG receiving over 1,300 submissions from startups across more than 100 nations.

A key differentiator for LG Nova is its departure from traditional corporate venture capital. It isn't solely focused on investment or seeking new technologies. Instead, the incubator prioritizes proposals detailing how startups intend to introduce their products to the market, capitalizing on LG Electronics’ extensive reach and influence.

The Selection and Development Process

From the initial pool of 1,300 proposals, LG Nova narrows the field to approximately 50 companies. Each selected startup is then paired with an entrepreneur in residence (EIR). This EIR collaborates with the startup to refine their ideas and develop a comprehensive proposal.

This process focuses on identifying potential synergies between the startup’s strengths and LG’s overall strategic objectives. The goal is to create a mutually beneficial partnership.

Joint Strategy and Funding

“Our approach centers on crafting a unified plan, one that isn’t simply the startup’s plan or solely LG’s,” explains Rhee. “We aim to formulate a joint strategy and provide funding for a proof of concept, a minimum viable product, or an initial implementation of this shared business plan.”

LG Nova intends to select 10 winning proposals later this summer. This marks the beginning of concrete action and potential collaboration.

Potential Outcomes and Benefits

Following the selection of the top 10, various outcomes are possible. LG could launch a new business with the startup, establish a joint venture, or make an equity investment. Commercial agreements between the startup and LG are also a possibility.

In certain cases, LG might even consider an acquisition if it’s deemed the most effective way to establish a new business venture.

“The benefits available to participating companies increase as they progress through the competition. Reaching the top 50 guarantees a dedicated champion within LG Electronics. Selection among the top 20 includes funding for a proof of concept or minimum viable product, typically ranging from $100,000 to $200,000.

For the final top 10, a $20 million fund is allocated to support and expand the joint business ventures developed. Interestingly, many companies emphasize the need for collaboration with LG Electronics, leveraging its distribution network and established market presence, rather than solely seeking financial investment.”

Key Takeaways

• LG Nova prioritizes market entry strategies over technology acquisition.
• The EIR program fosters collaboration and synergy between startups and LG.
• A range of partnership options are available, from joint ventures to acquisitions.
• Access to LG’s distribution and market presence is a significant benefit for startups.

Introducing the Initial Cohort of LG Nova Companies

During CES last week, LG Nova revealed its first nine partner companies, and a discussion with Rhee provided further insight into the program’s objectives. A primary focus for LG Nova isn’t solely financial gain; rather, the accelerator aims to foster the development of entirely new businesses and operational divisions.

Rhee emphasized that while company quality and potential are considered, the crucial factor is the possibility of synergistic growth. “We assess whether we can achieve success collaboratively,” he explained. “Is there a point of intersection? A shared foundation upon which we can build? The companies selected thus far aren’t necessarily indicative of our ultimate interests, but rather represent opportunities for joint ventures.”

A closer examination of the announced companies reveals the rationale behind LG Nova’s selections.

Connected Healthcare: A Key Focus

“Connected healthcare represents a significant area of investment for us,” Rhee stated. “We are supporting two companies in this sector, including XRHealth, which uniquely integrates healthcare with the metaverse. They deliver physical therapy training via AR/VR within a metaverse environment, with the explicit intention of enhancing patient health and recovery.” LG Nova plans to pilot service centers with XRHealth across the United States in the coming months.

“Maya MD, an AI-powered digital health assistant, is designed for integration with LG televisions. Given our substantial television user base, we are bringing this technology directly into homes. These initial companies are still undergoing proof-of-concept testing, and full-scale rollout as established businesses is not yet guaranteed. We are currently in the evaluation stage, aiming for pilot programs or minimum viable products to assess their viability.”

Beyond the Hype: Exploring the Metaverse

The accelerator is also exploring the metaverse, but with a pragmatic perspective. “I suspect many are growing weary of constant metaverse discussions,” Rhee acknowledged with a laugh. “I share that sentiment. However, I firmly believe in the power of virtualization – the ability to expand and augment the physical world.”

LG’s interest lies in the metaverse’s potential to enhance real-world experiences, and the selected startups exemplify this vision.

“Companies like I3M and iQ3 were chosen to illustrate this concept. iQ3 offers a metaverse platform for training technicians and engineers in practical settings, directly benefiting skilled trades. We intend to collaborate with them within the electronics industry. I3M, conversely, focuses on enhancing travel and tourism, allowing users to virtually experience destinations like Africa before physically visiting, blending travel with in-home immersive experiences.”

Addressing the Growing Demand for EV Infrastructure

LG recognizes its established presence in electric panels and systems, and is keenly aware of the increasing energy demands of electric vehicles. “The EV market and broader mobility sector are crucial, so we’re adopting a targeted approach, specifically focusing on EV infrastructure.”

“SparkCharge provides a mobile battery charging service, bringing the charger to the vehicle’s location, eliminating the need to search for charging stations. We are developing a pilot device for home use, leveraging our existing market penetration. Additionally, Driivz offers an operating system for EV charging and energy management, facilitating communication between buildings and charging stations. LG’s existing energy business makes this a particularly compelling partnership.”

Enhancing Smart Home Experiences

LG aims to leverage its extensive presence in millions of U.S. homes through its televisions and appliances to deepen customer engagement. “The Smart Life category represents an evolution of the smart home concept.”

“Everykey provides a smart key technology that enables seamless login to the LG ThinQ platform without password entry. a.kin, an Australian company, is particularly noteworthy. They develop AI technology compatible with the ThinQ platform, specifically designed to support households with individuals requiring additional assistance. For example, families caring for elderly relatives or children with special needs often face complex scheduling challenges. a.kin streamlines these processes, offering a smart scheduler that understands household needs and proactively suggests solutions. For individuals with neurological conditions, a.kin can provide minute-by-minute support scheduling, easing the burden on caregivers.”

The Future Trajectory of LG Nova's Innovative Initiative

Within my professional sphere, interacting with startup founders is commonplace. However, encountering individuals radiating genuine, childlike enthusiasm for their work remains a rarity. Observing Rhee’s animated gestures and palpable excitement during our discussion, I inquired about the source of his passion for operating at the confluence of startups and the expansive LG corporation.

“The reason for my excitement is multifaceted! Numerous competitors exist within this domain, yet they predominantly employ conventional corporate innovation strategies. These typically involve investments, innovation programs, and mergers & acquisitions – actions that are often disjointed. They spread investments across multiple companies, acquire some, collaborate with others, and fund still others. I contend that this constitutes a scattershot methodology. This is precisely why we’ve engineered a distinctive approach. I embrace calculated risks, and I am confident in our success due to the streamlining of various elements and our dedication to forging new ventures. Ultimately, this is an experiment, and that’s what fuels my enthusiasm.”

A final question I posed to Rhee concerned LG’s motivation for undertaking this initiative. Given the company’s substantial workforce of engineers dedicated to research and development, why pursue a startup-centric innovation program?

“We recognize the exceptional talent within our organization. However, we also acknowledge the existence of countless brilliant minds outside of LG. When considering innovation, it must extend beyond internal gains; it needs to generate broader impact. Our aim is to foster a scenario where synergy creates more than the sum of its parts. This philosophy underpins the unique nature of this program compared to other corporate entities. Most large corporations prioritize their own innovation and benefits. While understandable, focusing on innovation for impact reveals the potential of the global landscape, not merely one company’s interests.”

For startups operating in areas of interest to LG, opportunities remain available. LG Nova intends to launch another challenge program in the near future.

“We plan to reiterate this program immediately following the completion of the current iteration,” Rhee stated. “We will analyze and improve the existing program, potentially incorporating new tracks or focusing on additional sectors. If you lead a startup and wish to explore possibilities, please contact us – we are equipped to assist. With July approaching, we are already developing the framework for the next program.”