David Eun on Samsung NEXT’s vision and portfolio
At CES earlier this year, Samsung NEXT president David Eun discussed a range of investments and portfolio companies working in the artificial intelligence, AR/VR and IoT spheres. David broke down the overall Samsung mission and how that translates to day-to-day operations like partnering, acquisitions and scaling. He enlightens from both a VC and tech perspective.
Ryan Lawler: I’m happy to bring on stage our president, David Eun. So, David is someone that I had known basically by reputation only and I’ve been really happy over the last few months to get to know him a little bit better as boss. So thanks for hiring me, first, and thanks for joining us here.
David Eun: You’re welcome.
Ryan Lawler: I guess to start, I want to talk about Samsung NEXT historically, how we got started and maybe you can tell the audience a little bit about how you came to Samsung and what your big idea was for this group.
David Eun: Well, I came to Samsung back in 2012 and at the time, obviously, Samsung had already established itself as an incredibly successful consumer electronics company and that continues to this day, right? We sell something like half a billion displays a year, two TVs a second, etc. And when I came, I saw that there was an opportunity to connect all the devices, not just to consumers but to each other. And if you could do that, then you’d effectively have one of the largest platforms in the world for distributing content and services and apps of all sorts.
David Eun: We formed a group, much like you would a startup. And what we’ve evolved into today, we are like a startup within this large company and we work exclusively with startups. So what we focus on is transformative software to complement the hardware and we do this by reaching out to different types of startups and entrepreneurs. We invest in them. We have a VC group. We partner with them, we do acquisitions. And we think about how to get them to the next level and this is why we call ourselves Samsung NEXT.
Ryan Lawler: Okay. So we’re called Samsung NEXT now, but we weren’t always called Samsung NEXT. I believe you started as, what, the global media group?
David Eun: Yeah, so I came because I had started my career many years ago in media and consumer internet and when I came to the company, that’s what my initial focus was. And what we realized is that while media was and still can play a very important role in the overall experience that Samsung provides, what we really needed was an integrated experience that provided a thoughtful, consumer-centric experience that would combine hardware and software. And it could include media but it could include so much more. And so, we very quickly expanded our focus to include media but not be focused just on media and what we’ve done today is broadened it quite a bit. But yes, the initial focus was on media for me.
Ryan Lawler: So one of the interesting things that I find being part of Samsung NEXT is it combines all these different things. It combines venture investment. It combines partnerships, M&A, product development. And a lot of large companies, they’ll have maybe a venture arm or they’ll have a corp dev function, but usually those functions are separate. Why does it make sense to bring everything in house under one roof?
David Eun: Well, we feel like we are doing corporate innovation in a new and unique way and if you look at how fast the spaces that we’re focused on are evolving and how challenging it is to be a startup, we really feel like you need to have lots of different types of support, lots of different functions in one place. So, you can work with entrepreneurs wherever they are. So, for example, we will work and meet with individuals who have ideas and help turn these ideas into products. We’ll work with small teams that have products and help turn these products into actual companies. And we’ll take small companies and help them scaling and go global. To do that, you need lots of different teams and expertise in one place and as I described before, it could include partnerships and M&A to help scale ultimately. It could include investors who can identify really interesting concepts and put seed money in, and everything else in between.
David Eun: So, we feel like there’s a huge advantage in providing all that in one place for our entrepreneurs. But also, for ourselves, because there’s lots of learning, there’s lots of insights, there’s lots of collaboration among the groups that we have within our own group.
Ryan Lawler: And I feel like, just speaking to that other point, meeting entrepreneurs where they are, maybe we’ll first meet a company as a possible venture investment, but then realize it makes sense to connect them with HQ for a partnership or potential M&A, right?
David Eun: Yeah, that’s right. And so one interesting example that I’ve spoken about in the past is we, years ago, thought that with the advances in mobile technology and changing consumer behaviors, you’d see lots of different opportunities in mobile commerce and in payments. So we identified this as a really interesting priority area and we looked around at different companies and we found this really interesting startup in Boston called LoopPay. They were about 40 people and they had created a proprietary, patented technology that allowed, effectively, you to put your credit card on a little dongle that you plugged into your phone. So we thought that was really interesting and we invested in it through our venture arm. And very quickly we realized that we could take this dongle, this hardware and the software, and effectively build it into the phone itself. And we ended up acquiring this company and we built the hardware into a phone. We launched the phone in, I think it was February of that year, and it wasn’t until August that we launched the software, the service of it. And today, it’s called Samsung Pay. And then, of course, we lit up the hardware part of it.
David Eun: And for me, that was a really interesting example of how we could come in and utilize different parts of our organization, ventures, partnership, acquisition, our strategy group, while working very closely with our mobile business. And if you look at Samsung Pay today, as an example, it’s in over 20 countries and there’s millions of people using it. So, for that startup that was 30-some people, they had this aspiration that as a startup, they might be able to grow and have a global presence, but it wasn’t always clear. And we were able to partner with them to do that.
Ryan Lawler: I think one of the other interesting stories is SmartThings. And I know that you’ve talked about this. I remember years and years ago coming to CES and they didn’t have a booth or anything. They actually … They rented out some mansion on the outskirts of the city and then they would …
David Eun: Not even.
Ryan Lawler: Yeah.
David Eun: So, it was actually at CES. This would have been CES 2014, probably. Yeah. And SmartThings was this hot little startup. The idea was to create a platform for IoT, so that different companies and different products could connect on an open system of tools and an operating system, as I said. And they were gaining some real momentum, but they were a startup. So, what they did is they rented a house off the strip and they basically turned it into a demo house, as any scrappy startup would do. And so during the day, they would try to convince reporters and journalists of all sorts to come out to their demo house and they rented a van and they would take the journalists out. And so it was a really scrappy affair.
David Eun: And then at night, they all took out sleeping bags and they slept on the floor of their demo home. In March of that year, I met the CEO and founder, Alex Hawkinson, and we hit it off and I thought, given our presence, because we are number one in mobile, we’re number one in TVs. We have so many … We have the fastest growing digital appliances business right now in the US. Thought if we could get these different devices, even within our company, connected, it would be a huge opportunity. So, we acquired this company in August and the following year at CES, the CEO of our digital appliances business was giving a keynote, as you would expect from a Samsung executive. And during this keynote, he brought out Alex Hawkinson on stage and that year our entire CES presence, and if you guys have been to our exhibit area at CES, you know it’s one of the largest if not the largest presence, we had basically rearranged and re-architected the presence around IoT and SmartThings specifically.
David Eun: So, there’s this great bookend story. The year before they were sleeping in sleeping bags getting a demo home ready and then the following year, the CEO was on stage helping give a CES keynote and the largest exhibit at CES featured the SmartThings company brand. And you come full circle to today. Samsung is completely committed to IoT, putting all its devices and connecting on the SmartThings platform. We will have one IoT app called SmartThings. We have one cloud infrastructure that everything will be connected to called SmartThings. And at the same time, SmartThings remains open. So we have something like 380 different products from 40 different companies. 50,000 developers. So, this vision that they had while they were still sleeping in sleeping bags on a floor, to be the world’s largest open IoT platform is still true and is happening today. And they have the scale and support of Samsung… So, for me, it’s still a story in progress. Still lots of work to be done. But it’s a great example of when we and Samsung can partner and work very closely with entrepreneurs in a startup to make one plus one equal three.
Ryan Lawler: I think that the open part of that is really the key part. Because it would have been easy for Samsung to acquire SmartThings, to take the technology and just say, “Okay. This is the platform just for Samsung devices that’s going to connect every Samsung device.” But not everyone has just Samsung devices, right?
David Eun: That’s right.
Ryan Lawler: And so, how do you manage to keep a company like that independent and convince the Samsung executives that there’s more value to it being a platform for all of these different devices rather than just siloed to our Samsung ecosystem?
David Eun: Well, it’s not always easy. Anytime a large, successful company identifies a technology or partnership or a service that they think is really unique and adds value, the initial muscle memory reaction is going to be, well, let’s figure out a way to make it unique and keep it to ourselves. But I think the way things have evolved, open typically beats closed. And especially if you are trying to make a market, which we’re trying to do with IoT, you need a lot of hands on many oars. And that means getting the developer community behind you. That means aligning with other companies and really, truly partnering with them. And it’s hard to do that with a proprietary OS that you own and control and you get all the benefit from.
David Eun: So, what we did is, first of all, we have great examples of how open ecosystems work because we’re the largest Android partner, as many people know from our mobile business. But we also know intuitively that in every home, you’re going to have products from different companies, right? It’s not likely that you’ll have every product from one company and so, for us, if we really wanted to create the best experience possible, while of course we would want any home to have lots of Samsung products, we also acknowledge that there were going to be products from other companies, and by the way, products that we don’t even make. So if you want to make a smart home, I think there was a very quick realization that you want to provide connectivity and support to really create the best integrated experience possible.
David Eun: And if you did that well, there’s actually an opportunity for consumers who are really delighted, frankly, to think about, well what if I got more Samsung devices? Would I have a better experience? And I think that’s the opportunity for Samsung and other companies that come in.
Ryan Lawler: Right. We’ll actually have Alex here on Thursday, so for all you people here in the audience, you can hear him talk about the SmartThings journey from him in a few days. So, one of the other pieces of that is just keeping it independent and not mucking up the thing that you acquired. And I know that you’ve talked about this in the past. So what are the key components to that and making sure that in an M&A integration way, you’re not driving the executives out, that it’s not just purely an exit where they take the money and run and they actually keep building post acquisition.
David Eun: Yeah, well it turns out successful M&A is easier said than done and if you look at the typical track record of any company that does M&A, there’s an expectation that not all acquisitions will effectively be folded in and successfully run X number of years after the deal. So, part of it for us is reframing what an acquisition is and I think there’s an opportunity for entrepreneurs also to think about it. I think in the past, people approached acquisitions as an exit, as success, as the end goal. And I think what we’ve done is we’ve reframed acquisitions to be a really important, critical step on a continuing journey for a startup, for entrepreneurs.
David Eun: And while, yes, it’s a success event for sure and there should be rewards for everyone who was involved in getting it to that point, if there is a bigger vision, which typically there is, then you look at acquisition almost as a form of partnership. To say, if we were to be acquired by, in this case, Samsung, how might we work with them after the acquisition so that we could get more resources, that we could realize the vision that got us to start in the first place.
David Eun: And when you start there and think about it as a really key milestone, but one of hopefully many more success events, then you plan and you approach it very differently. So one specific area is what happens after an acquisition. So, we call that mergers and acquisition integration. MAI. And we start thinking about, well who does what, when, after the acquisition? And we’re very detailed about it. So much so that as we’re looking at the company to acquire, during our due diligence, we need to get comfortable that there’s a very effective post-acquisition plan in place, or else we won’t do the deal…. So, when we do do a deal and complete it, we have a very detailed idea of what success should look like operationally, and that, I think is really a critical factor in ensuring that you don’t, even with good intentions, step and crush a smaller startup if you’re a large acquiring company, that your cultural approach to the company is one of respect, and you create paths and opportunities for those who work in the acquired company to realize earlier ambitions and visions that they had. Or, frankly, even create new ones. Because there’s so much more that should be possible if you get acquired by a company like Samsung…. So, that’s what we really focus on and again, we think we’re relatively early. It’s early days. But we’ve now done quite a few acquisitions and we’re seeing great results.
Ryan Lawler: So we’re just a couple weeks into 2018 now. Obviously, as part of your corporate review, looking back on 2017, what were the key accomplishments? What were the things that you look back on are what Samsung NEXT really did well last year and how do you build on that going forward?
David Eun: Well, I think there’s always a hard and specific data and facts that you could point to and we do, because you should and we need to. We invested in 29 companies. We did four acquisitions. We worked on a lot of very critical, significant partnerships for our group and for Samsung. But I think, underneath that, we’ve always had this strategic goal and this realization that if you are a company that wants to continue to grow and succeed in the spaces that we’re in, you absolutely need to combine the best of both worlds. And by both worlds, I mean hardware and software, global corporation and startup, Silicon Valley and fill in the blank cities. And what we did last year was effectively bring that together in the initiatives that we were driving.
David Eun: So, whether it was an acquisition of companies that later were folded in to become one of the largest product launches we had last year in Bixby, or whether it was continuing to scale and push for SmartThings to become the de facto brand and platform for IoT for the company, for me that was our biggest achievement. This idea of staying focused on building a startup-like structure, retaining a culture, attracting startup people and having them work very successfully with really great folks who know how to run a large, global corporation and to maintain that balance. And I think we did that very effectively last year.
Ryan Lawler: Coming inside and learning about the types of technologies that we are interested in as part of Samsung NEXT, there’s a lot of AR, VR, IoT, AI, and machine learning, all these things that are forward looking, future focused, that might not today necessarily have a home in the Samsung ecosystem. Why are we focused on those particular pillars? What’s interesting about them from a Samsung perspective?
David Eun: Well, the first thing is I think there are immediate applications in all those pillars and at the same time, I agree with you, they’re in new areas that will continue to grow and need to grow. And in fact, it remains to be seen how these different areas, whether it’s IoT or VR/AR, evolve, right? It’s going to be interesting to watch. But if you take a step back and look at it from a Samsung perspective, one of the things that we’re very committed to is this idea of really thinking about what are the best consumer experiences? And in a world where you have so many more devices and so much data and so many more interactions with different people and different services out there, what we’re looking to do and the reason why the areas that you mentioned are so important to us is we really feel like it can help people streamline and simplify the world around them. And in a genuine way improve the relationship that they have with their devices and, as a result, with each other.
David Eun: So, when we talk about transformative software and services, yes, we’re looking at things that can leverage our hardware footprint, but it’s not just a direct, naked appeal to commercial profits. It’s really thinking about, well what are the needs out there for people, for consumers? And while there’s so much good that has resulted from this technology, what are the things that, frankly, are challenges and problems to be solved? And so, we’re very focused on that. So this is why IoT is important for us. This is why AI is going to be a layer in every service we see, right? This is why there’s so many applications for VR and AR, in addition to gaming and entertainment, that we’re so excited by. And this is what drives us, ultimately.
Ryan Lawler: So, looking forward to 2018, you know everybody’s doing their predictions for what’s going to come in the next year. I’m not necessarily asking you to predict the future, but what are the key trends that you’re looking out for? What are the things that you’re excited about that could come to fruition maybe over the next 12 months?
David Eun: Well, I think there will continue to be growth in the areas that we just talked about, that you mentioned. And that will be exciting to see. But if you take a macro view on it, over the past couple of years, you’ve seen what I would call the centralization of network infrastructure, of data, of storage, in fact, and the emergence of the cloud and all the great things that have come from it. The ability to apply AI and deep learning. The accumulation of all this insight around the data, etc.
David Eun: And what’s happened now is that while there has and will continue to be lots of innovation in the cloud, to a certain extent, it will get more and more commoditized over time and what I think we’re going to see is a pendulum swing back to this idea of decentralization, where there’s going to be more computing power, more storage happening at the edge. And that will include devices. That will include how services are structured… So, as you think about things like IoT, where you have devices in a smart home or autonomous driving, you’re going to have so much data and there could be bandwidth constraints sometimes. There’s going to be latency challenges. It’s inevitable that there are going to be innovation opportunities at the edge for entrepreneurs and for Samsung. So, I think what we’re going to see is within the categories that we just talked about, IoT, AR, VR, AI, you’re going to see startups, and we’ve already started investing in them and seeing them, that are going to try to apply their particular expertise in those subject areas but also bring it to the edge… So, if you’re an AI startup, can you provide really great AI insights with lower computing power, right? Or with less data? Can you do it more efficiently, etc.? And so, I think that’s going to be really interesting to see next year and the coming years.
Ryan Lawler: Okay. Well, with that, I think we’re going to wrap up. For those of you watching, stick around. We’re going to have another session in a few minutes. David, thank you again for joining us and thanks again for hiring me.
David Eun: Thanks for having me, Ryan.