Samsung Wants Silicon Valley's Talent and Respect

Image: Eric Millette for Forbes

Stumping for startups: Marc Shedroff and David Eun at the Samsung Accelerator in Palo Alto

On tree-lined University Avenue in Palo Alto, California, in a defunct Borders bookstore, a handful of young engineers are funnelling cutting-edge software ideas to a technology behemoth in South Korea. You wouldn’t know it if you walked past, but this is the Samsung Accelerator, an 11,000-square-foot, open-plan office with many empty desks. ‘The Next Big Thing’ is painted in large letters on one wall. Over the coming year and beyond, Samsung can fill this place with 80 or so software engineers “acqui-hired” from Silicon Valley and elsewhere with all their intellectual property and entrepreneurial dreams folded into the Samsung empire. The pitch: Join us and free yourself of startup stress, because with a billion devices worldwide, we’ll be partnering with you anyway.

Plenty of other big companies like Nike and AT&T have set up accelerators in the Bay Area in a bid to act innovative, but Samsung is here to solve a relationship problem too. Despite enormous global reach and $188 billion in 2012 sales, many software developers are hesitant to work with South Korea’s biggest chaebol. When Samsung, for instance, reached out to Damien Patton about running his social-discovery app, Banjo, on its still-under-wraps smartwatch, he says he was “leery”.

“I was sceptical based on everything I’d heard,” he says. “They are difficult to communicate with. A company that is a world away from us in the Valley.” Others Forbes spoke with from the famously iPhone-first developer community alluded to pushy Samsung managers who want to do in two months what developers normally do in six, or to a byzantine network of competing teams at Samsung’s vast R&D facility in Suwon, a joyless hierarchy obsessed with control.

Yet Patton changed his mind when he discovered that Samsung, in the last year, has changed its approach. For one, it had a new emissary, a Korean-American named David Eun, who in a previous life had brokered media partnerships at Google and AOL. Eun joined Samsung in December 2011, eight months before a US judge ordered Samsung to pay $1 billion in damages for infringing on the iPhone’s design, reinforcing its reputation as a copycat.

Eun sensed a disconnect and started flying batches of senior executives over to Silicon Valley to soak up the culture and meet his old contacts. By the middle of 2013, Eun had set up accelerators in Palo Alto and New York, a venture arm for early-stage startups, a partnerships division and an M&A division that, in July, spent $30 million on Boxee, a home-entertainment software firm that would be integrated into Samsung’s smart TVs.

All these operations are tucked into a new operation Eun runs called the Open Innovation Center. In October, Samsung held its first developers conference in San Francisco. Over in London, Samsung’s European HQ, executives began reaching out to startups and sponsoring conferences. “Before, you would speak to the [Samsung] guy in London, and every month he’d say ‘no’ to speaking to the guy in Korea,” says one UK developer. Now his local liaison was actively connecting the two dots.

So dedicated was Eun to his job that four days after stumbling out of the Asiana Airlines plane that crash-landed on a San Francisco runway in July, he showed up, unshaken, to host a glittering party to open the Palo Alto accelerator. “We’re a very hardworking, intense company,” says Eun in between meetings at the accelerator a few weeks later, clutching his ever-present Galaxy Note. “Once we make a decision, it’s just boom, boom, boom, boom.”

Banjo’s Patton ended up liaising with Eun. When he had questions about how Samsung wanted notifications and device-synching to work on future smart watches, he was surprised to get his questions answered within 24 hours. “David elevated things internally,” he says. “Those questions had to go to people who were thinking about the future of Samsung.” Two and a half months later Banjo was one of the leading apps on the Gear Smartwatch when it was launched in Berlin. The watch was critically panned, but Patton doesn’t mind. “Samsung is going to make a big bet in wearables,” he says.

Samsung, a hardware company at its core, needs more software startups like Banjo coming on board. Apps sell phones, and Samsung doesn’t have a powerful app platform like Apple or Google. So far Samsung has a handful of startups in each accelerator, and its venture capital team has invested in nine others, with a view to invest in one startup a month.

Entrepreneurs who join the accelerator can expect a steep learning curve. Samsung is an octopus with tentacles in processors, OLED screens and memory. Its fast-and-loose experimentation can be maddening for suppliers. When Steve Jobs announced the measurements of a new iPad two years ago, Samsung shut down its own tablet project and had a thinner design ready in a month. “We thought it was good enough. But seeing other products, it [was] not,” says Hankil Yoon, Samsung’s senior vice president of mobile devices. Samsung is also notorious for cycling through executives toward the end of each year. Its top US mobile exec, Kevin Packingham, left inexplicably in October. New recruits should brace for their projects.

The upside is near instant access to a billion devices. Dwipal Desai was the first entrepreneur to join Samsung’s accelerator in Palo Alto. The former colleague of Eun’s and co-creator of YouTube’s first mobile app is developing a sound-and-music service to work across multiple Samsung devices. He gets early access to prototypes to test his service on them. Desai says he doesn’t mind the loss of intellectual property and independence. “I was spending 40 percent of my time on everything besides working on the product,” he says. “Here I’m spending 99 percent of my time on the product.”

Silicon Valley stalwarts are sceptical that a big-company accelerator can capture the Valley juice. More than 1,000 corporate incubators were introduced during the late-1990s tech boom, says Dinah Adkins, who was chief staff executive of the National Business Incubation Association at the time. “And [now] they’re gone,” she says. “There’s only so many startups,” says Paul Graham, co-founder of the Y Combinator accelerator, which has spawned more than 550 startups since 2005.

Samsung at least can afford to give it a shot, if only to stay in the swim. “Historically a lot of the innovation in software and services has tended to come from smaller groups of people working together,” says Eun, “not necessarily large companies. We want to make sure we aren’t missing things.”