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External Venture Investments
by Nortel |
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Venture Financing Process: Selection of
Opportunities
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Value-added activities in the
area of relationship management, screening and selecting strategic
investment opportunities, and the capacity for entrepreneur-friendly
acquisitions allow Nortel's business model to work effectively and with
speed
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Nortel maintains close ties
with and invests through 7 to 8 carefully selected venture capital (VC)
firms that are at the forefront of creating new telecommunications
service providers. These firms make a network of relationships that
makes visible 90-95% of what Nortel needs to know on an ongoing basis.
Nortel uses its side-by-side collaboration with
VC firms to gain access
to entrepreneurs and ventures and to learn the skills of venture
screening, valuating, investing and monitoring
VC Funding: Key Documents To Be Prepared
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Occasionally, investments
lead to acquisitions. However, usually Nortel has no intention of
acquiring the service providers; rather, it's aim is to learn and
understand new business dynamics, to cement relationships, to get
access to new-generation technologies, to cut out its own comparable
research effort, to support OEMs, to share in the value created by
its investments, or to get some preferential rights.
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Major acquisition made by
Nortel in order to integrate critical disruptive technologies
include acquisition of Qtera, the leader in ten-gigabit fiber-optic
technology, for $ 3.25 billion, and acquisition of Bay Networks,
manufacturer of LAN switches and other networking equipment, for $
9.1 billion.
3 Strategies of Market Leaders
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Nortel's Core Competence –
Seeking out the Discontinuities
Having declared its independence
from AT&T and Bell Canada in 1976, Nortel has grown to become a world market
leader in telecommunications, voice, and data transmission. By the turn of
the century, Nortel owned up to 90% of the world market for its selected
competence areas such as ten-gigabit systems. The key to this success is the
company's ability to seek out the discontinuities, whether they crop up in
technology or in the market it serves. Having mastered this ability, the
company knows what to do when - and quite often before – the discontinuity
happens.
Unwilling to settle to mediocre
results, Nortel has developed a significantly advanced technology program
and is serious about finding and implementing disruptive technologies in
such areas as wireless communications and optical networks.
Sources of Nortel's Competitive
Advantage...
Partnering with Venture
Capital Firms...
Formalizing Relationships
with VC Firms...
Reciprocal Preferential
Treatment...
Corporate Investing Through External
Venture Capital Firms...
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