Back to school for corporate venturing

Last month definitely had an air of going back to school about it – plenty of homework to do and lessons to learn – but the reaction to this depends on the eye of the beholder.

A record of more than 150 deals involving corporations were recorded by Global Corporate Venturing, while thenumber of venturing programme launches maintained its pace with some stellar commitments being made by Baxter International and Merck among numerous others (see deals table and news pages for more).

Successful corporate venturing is increasingly the most reliable way to predict which companies will outperform over the longer term, and is also a great vantage point to predict the strategies of peers so alliances and consortia can be formed for deals. (For more on this, visit the Harvard Business Review website for the Global Corporate Venturing blog page.)

These alliances are never more necessary than when looking at the natural resources and clean-tech sector. The size of investment cheques needed and length of time for businesses to move towards profitability are of a scale that makes most investors blanche.

To utilities and energy companies, spending hundreds of millions or billions of dollars to build a new refinery or plant is par for the course, as long as it works.

The double jeopardy in many areas of clean energy or technology, unlike most software, is the innovation can fail when scaled for commercial use after decades of experimentation, as well as at the pilot stage.

This makes hardened risk-takers question whether the goal is attainable. The rewards for success, however, are often multiple uses for the product and large revenue streams.

While some companies react with fear to the competitive threats posed by a globalised world of innovation and strategy drift from competitors, others see the opportunity to take their business into new markets or find the collaborators able to help them deliver a better product or service.

As a result, corporate venturing is like any other form of investment – swayed by fear and greed. But corporations that set up a venturing unit out of fear can find the battle has already been lost and either the unit is promptly shuttered or the business is taken over.

Those tempted by the opportunities to expand ever more quickly into new areas or use venturing as a way to tap ever more entrepreneurs – greed – will find their nemesis quickly follows such hubris.

Instead, a balance of long-term thinking and openness to new ideas and opportunities that might fit the culture and established skills of the company offer a more promising path to both financial and strategic goals. These are the routes taken by many of the most influential corporate venturing units, such as Steamboat Ventures, Samsung Venture Investment and, this month’s top-rated unit, Chevron Technology Venture Investments (see main feature and profile).

Many in the corporate venturing community have this balance of openness and appear keen to work with all potential investors (see survey page).

And judging by the responses from other types of investor, this openness is starting to be reciprocated as the beholders take off their blinkers, potentially to the benefit of the entrepreneurs if it encourages greater investment and longer-term thinking.

This community of interconnected investors is one reason why the publisher behind Global Corporate Venturing will be launching the beta version of a new title looking at the role of universities in supporting entrepreneurs this month, and has joined the American Strategic Challenge to offer its techscouting service to readers.