Comment from Patrick Flesner, partner, LeadX Capital Partners

Given the Covid-19 crisis and its severe business implications in many industries, corporations have started scrutinising their corporate venture capital (CVC) activities again. Is CVC here to stay this time or has this been just another CVC wave that is about to ebb away? I argue their are several good reasons why corporations must continue engaging in venture capital activities and that CVC is here to stay. The Why Generating Financial Returns CVC units can provide their corporate sponsors with “attractive” financial returns. And the CVC units need to generate such financial returns if they do not want to lose corporate support and their right to play. But even more important than “attractive” financial returns is the strategic value that CVC units can generate. Detecting Long-term Industry Trends Professional corporate venture capital investment teams engage deeply with all players in the startup and innovation ecosystem, including founders, business angels, institutional and other corporate investors as well as intermediaries and industry experts. By constantly being in touch with people working on innovation topics in the relevant industry, investment teams detect long-term industry trends early on. This is especially true for CVC units that also focus on investing in early stage companies. The knowledge gathered by investment teams is communicated to the relevant business units within their corporations (e.g. innovation, digitization, strategy and/or M&A departments) so that their corporate sponsors can respond to these industry trends correspondingly, for instance by adjusting their R&D activities, product offerings or the go-to-market strategies. Exploring New Markets, Industries and Geographies CVC activities offer the possibility to invest in innovative companies active in new markets, industries or geographies and thereby enable corporations to explore relevant new business opportunities. On the basis of the respective learnings, the corporations can then decide whether or not to further pursue activities in this regard. Becoming Aware of Potential Disruptions and Disruptors Investment teams notice if founders are working on new (digital) business models or are using new (digital) technologies that may completely change how business is done in industries. Therefore, CVC units cannot only detect long-term industry trends but also potential industry disruptions and disruptors. If investment teams have the mandate to invest under a broad investment focus, they can detect potential disruptors also if such disruptors are active in adjacent industries. A good example of a corporation that has repeatedly disrupted adjacent industries and continues to disrupt industries is Amazon. Becoming the Disruptor or Investing in the Disruptor If corporations learn about potential…

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