One company’s side project could be New Venture Partners' treasure.

While venture capitalists spend their time poring over hundreds of business plans in hopes of finding the next Google (GOOG), New Venture Partners relies on the research and development labs at large corporations to give them their next big idea.

“We really see ourselves as partners with large corporations around innovation,” said Stephen Socolof, managing partner at New Venture Partners. “We really try to appeal to senior corporate managers and senior R&D people.”

Instead of fielding pitches from entrepreneurs, the VCs at New Venture Partners go into the research labs of big corporations like Intel (INTC) and Alcatel-Lucent (ALU) to find products they think can be spun off into stand-alone companies. New Venture Partners acts as a partner to the corporations, with both sharing in the profit if the company is successful.

“These companies spend a hundred million to billions of dollars on R&D and by nature produce ideas that aren’t going to be core to the parent company and its business,” said Socolof. “Sometimes there are good ideas that represent an interesting business opportunity outside the realm of the corporation.”

Take EverSpin Technologies, the unit of Freescale Semiconductor (FSL), which thanks to an investment from New Venture Partners, was spun out in June as a stand-alone business.

EverSpin makes MRAM, or Magneto RAM, which is non-volatile, random-access memory technology that’s designed to replace flash memory and potentially even DRAM memory. While Freescale, of Austin, Texas, has interest in embedding the MRAM into its core microcontroller products, MRAM has uses outside of Freescale’s realm and thus would be better suited out of the control of the parent company, said Socolof. 

“Freescale gets what it wants out of the technology…and at the same time we help that business broaden that opportunity and therefore make the investment much more valuable,” he said. 

Another recent corporate spinout that New Venture Partners was behind is GainSpan, which came out of the lab at chip giant Intel. GainSpan makes chipsets that take advantage of WiFi to enable companies to access information on industrial processes using sensors. 

New Venture Partners has done more than 60 corporate spin offs. One example of a success was Flarion, which was spun out of Lucent. Flarion is a wireless infrastructure company started by one person in a lab at Lucent. Flarion attracted $200 million in capital and was eventually sold to Qualcomm (QCOM) for $600 million, said Socolof. 

But New Venture Partners doesn’t only invest in technology companies. David Tennehouse, a partner at New Venture Partners, said the company has invested in corporate spinouts in health care and media as well. 

New Venture Partners was founded by a team of executives at Lucent whose job it was to provide a path to commercialization for Bell Labs inventions. The company’s expertise in corporate spinouts, said Socolof gives it an advantage over other VCs and makes it a reliable partner for corporations. 

“It’s pretty complicated,” said Socolof, as to why corporations don’t spin out products on their own. There are issues of how to finance or fund the product and how to create the business plan that will enable the entity to stand on its own. “It’s a lot of work to take something so early stage outside the core parent corporation,” he said. 

While there are some VCs who dip their toes in corporate spin offs, Socolof and Tennehouse said the commitment needed to do this kind of VC investing is off-putting for many venture capitalists. For instance, the spinout of EverSpin took more than nine months, which could be too long and too costly from a time perspective for many VCs. 

“People involved in a VC firm want to do a deal this week and go on the next one and the next one,’’ said Tennehouse. With New Venture Partners’s investment strategy there’s “a lot more patience and willingness to spend time with the team.” 

So how does New Venture Partners go about finding the products that may make a successful spinoff? According to Socolof and Tennehouse, it’s all about relationship-building within the corporations. The VCs get to know the leaders in the R&D labs at big companies and also try to forge relationships with the corporate leaders. In the past few years, New Venture Partners's reputation as a partner for corporate R&D has spread, resulting in companies coming to them.  It doesn’t hurt that the VCs at New Venture Partners have experience in big corporations. 

“Many of us worked at large corporations and that’s a skill in itself,” said Socolof. “Knowing what it’s like in the shoes at the other end of the table really helps.”