Setting up a corporate venture capital (CVC) fund can be one of the most efficient and effective ways to attract external innovation to a large enterprise. Done wrong, it can also be a colossal waste of money, brains and time.
Unfortunately, it is typically done wrong.
Returns data for CVCs are notoriously difficult to compile. Dollar-weighted (by round size), realised, cash-on-cash multiples for all US venture financings in exiting companies from 2008 through 2017, were 2.2 times for all financings, compared with 1.8 times for all financing with at least one corporate VC participating, according to unpublished data by Correlation Ventures, which includes data from DowJones VentureSource and other primary and secondary sources.
The difference in returns is less pronounced the…
