Intel Capital veteran Lisa Lambert jump started electric utility National Grid's $250 million in-house venture fund. Here's how she incentivized her team to outperform.

Lisa Lambert — chief technology and innovation officer at National Grid and founder and president of National Grid Partners

When she launched the corporate venture organization at utility giant National Grid, Lisa Lambert decided to break from the norm in the industry and use a compensation program taken from traditional venture firms.
Unlike most corporate venture groups, National Grid Partners, or NGP, has a carried-interest program that allows investors to share directly in the gains from their investments.
Lambert argues that the program encourages accountability and discourages bad bets.
Other than that program, Lambert largely patterned NGP after Intel Capital, the chipmaker's widely respected and long-running corporate venture capital, where she worked for nearly 17 years.
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When Lisa Lambert got the job of setting up a corporate venture capital operation for utility giant National Grid, she turned to one of her former employers for inspiration.

Lambert had previously worked for more than 16 years for Intel Capital, one of the longest-running and most widely respected corporate venture arms. So it was only natural that she would take some lessons from her time there to National Grid.

"Everybody models themselves after Intel Capital and rightly so," she told Business Insider in an interview earlier this month.

But Lambert was determined that at least one big thing would be different at National Grid Partners, or NGP, the utility's venture arm, where she serves as president. She wanted NGP's investors to be able to share directly in the success of the startups they backed. So, she borrowed a page from the traditional venture industry and put in place a compensation program for NGP investors in which the organization divvies up with them 15% of the profits the venture arm makes on its investments.

That model "is very much an incentive to outperform," said Lambert, who also serves as National Grid's chief technology and innovation officer. It "keeps us grounded," she continued, "because we're delivering strategic value, but at the same time we're not making bad investments."

Carried interest encourages accountability, Lambert said

Such compensation arrangements are typically called carried-interest programs. They're generally the rule at traditional, independent venture firms, although those firms and their partners usually get a 20% cut of the gains from their investments.

Carried-interest programs are uncommon in the corporate venture world, where investors are usually salaried employees. Just 13% of corporate venture capital, or CVC, operations have carried-interest programs, according to a recent survey by J. Thelander Consulting, an industry research firm, although many more firms — some 25% — are considering them.

Corporate venture arms that don't have such programs lack accountability, said Lambert, one of the exceedingly few Black women in venture capital. Most corporate venture organizations have a dual mandate — to invest in businesses or technologies that have strategic significance for the parent company and to deliver a return on their investment, she said. But if the corporations' investors don't have an incentive to produce those returns, they're more likely to make bad bets.

"You can call anything strategic and get the business unit excited about it," Lambert said. "But if a company fails in two years, then what good is that? You've wasted your time, you've wasted the money, you've wasted the business unit's engagement."

NGPs venture arm intentionally resembles Intel's

Other than the way she set up NGPs compensation program, though, Lambert largely patterned the organization after Intel Capital. Like Intel's venture arm, National Grid's invests in all stages of startups, from those just getting launched to mature, established ones.

Last year, NGP opened an incubation center in its San Francisco office for very early-stage startups to help them get off the ground by connecting them with its operating businesses and with other potential customers. Most of its venture investments, though, are in growth- and later-stage startups, Lambert said.

Similar to other corporate venture operations, National Grid's venture arm is supposed to focus largely on investments that have strategic value to the company. About 65% to 75% of NGP's investments are expected to have direct and near-term value to the parent company's operating units, Lambert said. To make sure it's in sync with those units, NGP works closely with them to help them figure out their investment priorities and the use cases for particular technologies, she said.

Each business unit has a different set of preferences. For National Grid's US and UK gas businesses, leak detection is a huge priority, as are technologies that can help with operations and maintenance, Lambert said. Its US electricity business, meanwhile, is focused on analyzing and managing its customer data and on technology that can help its field workers do their jobs, she said.

"The business unit really defines where we should focus based on what their needs are," she said.

National Grid is re-upping its investment in NGP

But not all of its investing is directed by those units. NGP reserves about 25% to 35% of its funds for what Lambert calls "pathfinding" startups. These are ones that don't have an obvious strategic value for any of the parent company's particular business unit at the moment, but are working on ideas that could be relevant or useful three to five years down the line.

Thus far, National Grid is fully behind Lambert. When she launched NGP in 2018, the utility company committed to investing $250 million over two to three years. It's since said it plans to supplement that amount with another $75 million in its next fiscal year. Since it launched, NGP has invested $155 million, spanning some 23 deals.

Lambert's mission is to inculcate innovation inside of National Grid both through its investments and by changing its culture. To do that, she both borrowed from Intel — and took a different path.

"The methods, the style, the approach" of Intel Capital "certainly made a big impression on me," she said. She continued: "They put CVC and the work we're doing at NGP on the map."

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