Samsung Has A New $150 Million Startup Fund -- What Could Go Wrong?

Earlier this month, Samsung announced a $150 million fund dedicated to startups, providing more ammo for its business development program Samsung NEXT (previously named the Global Innovation Center). In true do-it-all Samsung fashion, the Korean tech giant uses NEXT for involvement from incubation, mentoring and investment to partnerships and acquisitions for game-changing new technologies.

“The startups we talk with are excited, thrilled, desperate, interested in how to engage with Samsung in a way that allows them to tap into this opportunity,” said Jacopo Lenzi, Samsung NEXT’s senior vice president of business development and M&A. “We can be that bridge between Silicon Valley speak--language, expectations, cultural sensitivities--and the larger company.”

NEXT has already divvied some of the new fund to 10 startups, including podcast curator Otto Radio and cybersecurity startup Intezer. Of 42 investments since 2013, the mothership has acquired 12.

The results are a mixed bag. While startups SmartThings and LoopPay became crucial technologies for Samsung’s smart home and payment products, Boxee’s acquisition crashed and burned over apparent internal conflict with Samsung months after the deal.

Lenzi stresses Samsung acquisitions aren't necessarily the end game when NEXT decides its portfolio companies. But as a unit in tune with the giant conglomerate’s needs, we may expect NEXT to boost consumer software or revolutionary engineering that could benefit users through Samsung’s wealth of distribution channels.

To predict the future, we reflect on the past. Here’s how some of Samsung’s picks made it big or fell hard. 

Smart home: SmartThings

  Samsung SmartThings now connects to Christmas lights. Credit: Samsung

Samsung SmartThings now connects to Christmas lights. Credit: Samsung

Alex Hawkinson founded SmartThings to create an IoT ecosystem for smart home products to control connected devices through a mobile app. Samsung GIC’s Open Innovation Center acquired the Palo Alto startup in August 2014 for $200 million, and it operates independently as a wholly-owned subsidiary of Samsung Electronics. For the conglomerate, it was a milestone to allow an open-source platform.

The bet paid off in time for the Korean electronics giant to square off against Google Nest and other rising smart home lineups. SmartThings’ technology provides the framework for Samsung’s IoT repertoire, allowing users to set up notifications and timer actions from their phone. SmartThings’ workforce has tripled in size since the acquisition. But the company is dropping its app support for Windows phones.

SmartThings may have been the tip of the iceberg for Samsung’s dive into IoT. It announced last year that it would invest around $1.2 billion in the technology in the U.S. over the next four years.

Video streaming: Boxee

The Israeli startup’s cross-platform freeware for home theater PCs would let users view and recommend content through social media. Samsung GIC acquired it for a rumored $30 million in 2013, but not long after the news broke, Samsung pulled the plug on the startup’s product Cloudee, a private video sharing app.

According to The Verge, the Boxee team was transferred from GIC to Samsung’s TV division to work in secret on a smart TV system with a tablet remote control. The reshuffle apparently didn’t bode well. The product was delayed and killed off, while several staffers, including CEO Avner Ronen, left Samsung. Other media reported that Samsung’s push for Boxee to replace Android with the Samsung-made Tizen as its operating system was the last straw.

Ronen went on to found PBLC, an open group chat platform.

Payments: LoopPay

  LoopPay is now Samsung Pay. Credit:   Android Headlines

LoopPay is now Samsung Pay. Credit: Android Headlines

LoopPay developed a small piece of hardware to be embedded into a phone case or cover that could be placed next to credit card readers. Now its cardless payment solution allows traditional credit card reading machines to receive magnetic signals from mobile devices without the need for any other hardware, thus closing the tech gap between traditional vendors and savvy smartphone users.

Samsung acquired the Massachusetts-based startup for about $250 million in February 2015 and renamed the service to Samsung Pay, which it introduced on its Galaxy Note 5 and Galaxy S6 Edge in August 2015. Now it is part of Samsung’s core offerings and has processed more than $1 billion in transactions in South Korea.

Social TV: Pixie

  Pixie CEO Kai Bond. Credit:   Venture Beat

Pixie CEO Kai Bond. Credit: Venture Beat

Instead of watching a game on TV and checking a separate device for stats and tweets, why not put it all on one screen? Pixie created an MSNBC-esque smart TV app to display a customizable on-screen ticker alongside the regular programming.

Samsung GIC brought Pixie into its first batch of startups in fall 2014, and the mothership acquired the U.S. startup in August 2014. Since then, Samsung has integrated the feature into its flagship TVs. 

Next up

There are also a handful of startups under Samsung’s wing that will be worth watching in the coming year as they continue to grow.

UniKey, which works with U.S. lockmaker Kwikset to create the $229 smart lock Kevo, has already claimed multimillion-dollar revenue in 2016 after raising at least $14.5 million from investors including Samsung. It wouldn’t be a stretch to integrate this tech into Samsung’s smart home lineup, which already includes some Kwikset products.

NEXT is making a virtual reality bet on Baobab Studios, maker of popular animated short “Invasion!,” which has raised a collective $31 million to ring in a new era of VR as film, tech and gaming converge. 8i, a New Zealand startup that makes 3D holograms of humans, is another VR bet, which received NZ$20 million ($14.5 million) from a joint funding round in November 2015. 

And with the new $150 million fund, Samsung NEXT recently invested in podcast curator Otto Radio, which is preparing to launch an API, and cybersecurity startup Intezer, which hopes to bring its software-mapping technology to market soon.

NEXT pitched in to a $29 million investment last August for security startup Virtru, which allows users to share data while maintaining control of it, so the data can be revoked after sending.

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