“I came up through auditing and working on IPOs,” Jeff Grabow said of his 30-year career at EY, the professional-services firm, “and so I got a ground view” of how businesses are built. “And it was a great experience because you’re tossed in dealing with CEOs and CFOs of really fast-growing, nimble organizations that are trying to grow and scale.”
Grabow entered the venture practice around 1992, but a family connection had previously exposed him to the agony and the ecstasy of entrepreneurship.
“I learned my uncle was doing venture in the late ’70s and early ’80s when I was in college,” Grabow said. “He was working on laser technology at the time and had raised money, and that company didn’t go well, and then he went off and developed another technology that ended up being successful. He’s now on his third startup.”
Grabow now leads EY’s U.S. venture practice, after stints in marketing and business development as well as six years as VC leader for the west region. “We really kind of sit in the middle of the ecosystem and try to help others connect,” he told VCJ.
EY also consults with founders, or as Grabow put it, “We advise, guide and recognize entrepreneurship.”
“The thing that I’ve probably taken away, in general, is the importance of being nimble,” Grabow said, reflecting on a quarter-century of work with startups and investors, “and the importance of being able to deal with adverse outcomes. The interesting thing is things never quite go as planned.”
Grabow added that when he talks to entrepreneurs, and they discuss financial projections for emerging businesses, he finds they may be off on those projections.
“The secret of entrepreneurs is how you deal with unexpected outcomes and challenges, and that’s where great entrepreneurs distinguish themselves from others,” he said.
Presently, Grabow sees innovation as presenting unprecedented challenges to established businesses.
“Never has technology been such a threat to so many incumbents,” he said. “You take a look at financial services, insurance, medical, robotics, all the things that are coming down the pipeline, whether it’s a direct threat to an endpoint solution that may already be in the market, or an opportunity to drive that inside the organization and cut costs.”
The rate of change isn’t following anyone’s schedule: “You can’t really time innovation. Corporations are trying to figure out, how do they engage? It’s better to do it yourself than to have it done to you.”
The results of this realization are visible in the venture business, for instance, in M&A transactions. “The volume of non-tech buyers outpaced tech buyers in 2016, and the dollar value doubled from about $5 billion to $10 billion,” he says. And more corporations are getting into the venture game directly, a welcome development for service providers like EY.
Grabow hazarded some predictions for 2017. “We’re expecting liquidity to open up,” on both the IPO and M&A fronts. “I think some of the recently public companies will start to acquire companies with the newly minted capital they’ve acquired in the public markets.”
The level of venture investment will continue to revert to historical norms, Grabow suggested, as the recent wave of capital from private equity, hedge funds and mutual funds subsides and “broader umbrella groups” seek out other investment opportunities. But corporate venture activity will remain high.
We’ll also see “some high-profile or unexpected companies go out of business,” which shouldn’t come as a shock. “Companies are funded and go out of business every day in the venture world, and that’s just part of the natural life cycle.”
“There’s a huge flood of technology out there ready to come online,” Grabow added. “It’s usually been like almost a bull/bear market, where you see big pushes into venture and then they kind of subside and wait to see how things play out before a new wave of innovation.” Now there are several subsectors—”machine learning, artificial intelligence, robotics”—with “broad implications across multiple industries that are trying to become mainstream.” While we’re seeing a slight pullback, Grabow said, after three years of a very strong market, “Innovation drives the need for venture capital, and there’s a lot of innovation out there, whether it’s pure-play tech or it’s other industries.”
Jeff Grabow, U.S. venture capital leader, EY. Photo courtesy of the firm.