Some 38% of CVC units have a team dedicated to helping portfolio companies make business connections. It is increasingly becoming a secret weapon for investors as portfolio valuations come under strain.
As many startups struggle to maintain their valuations — especially at the later stage as the number of exits collapsed in the first quarter — a new hero is emerging at corporate venture capital units: the business development (BD) manager.
Most investors promise at least some support for their portfolio companies. Typically, they try to help with follow-on financing or strategic guidance but entrepreneurs also particularly value help connecting with customers or suppliers, hiring staff and operational guidance around developing products and services, according to a recent academic survey of European investors.
Corporate venture investors focus on this kind of operational help more than most investors as the strategic value of the investment — how it can fit in with the parent corporations goals — is generally more important than pure financial returns.
A growing number of CVC are setting up dedicated business development teams to help portfolio companies in this way. Our latest Global Corporate Venturing (GCV) Touchstone Annual Survey found that some 38% of CVCs have set up a portfolio development team.
“Business development teams play a critical role in scaling up technology. They use their knowledge, network and industry expertise to identify opportunities for portfolio companies that have the potential to become successful and help them grow,” said Varun Rikhi, implementation manager at Shell Ventures, last week at the Scaling Innovation Workshop organised by the unit.
Rikhi said it was crucial for business development teams to collaborate closely with other functions within the company, and he noted that business development is never finished.
“Scaling innovation is an ongoing process. Business development teams must be constantly monitoring the market, be involved in evaluating new investment opportunities, and working closely with portfolio companies to ensure they are well-positioned to succeed in an ever-changing market,” he said. Business development teams, he said, must be willing to adapt and evolve over time.
Rikhi and Yoachim Haynes, the vice president of strategy at Energy Impact Partners, the clean energy investment fund for a number of large corporations, put together some starting points for CVCs interested in creating a business development team:
- Get management buy-in. Listen to what the CEO and executives are looking for and then get them talking with startups. It also helps to train the rest of the executive team on how to work with startups. At least one person in each time, including legal, HR, finance and procurement should understand how to work corporate investors.
- Share your investment thesis with the company. If the corporate venture team has a thesis for investing, including looking at how the whole industry sector is likely to evolve, it is easier for business units to understand where different startups fit into the picture. It becomes easier to see which startups they should be trying to work with in the short and medium term.
- Develop and sell the value proposition of a joint project. Business units will usually only take the lead on working with a startups when they have an urgent need for something. Usually, it is up to the business development team to get everyone talking about joint projects. They need to do the leg work on finding out what both sides need and what they can offer each other.
- Find champions and incentives to help scale up pilot projects. Even if a pilot project is wildly successful, it can be challenging to turn it into an ongoing business proposition. The business development team needs to find people in the company who can push this forward — and the company must incentivise these people properly, so that they are really invested in making it a success.
A useful case study of business development for startups is the HS2 Accelerator programme, an accelerator linked to the building of the fast-speed railway being built in the UK. The accelerator programme, which is run by Connected Places Catapult, HS2 and Birmingham’s Bruntwood SciTech digital community, is bringing in startups that could help the expensive rail infrastructure project save money. The projects are also trying to reduce the carbon emissions and environmental impact of the project.
So far, the HS2 Accelerator has supported 25 startups who have since collectively secured 21 pilot projects on HS2, raised more than £130m in funding and investment, and more than doubled their teams creating over 400 new jobs.
Howard Mitchell, head of innovation at HS2, said the pilots with previous cohorts had saved £200m last year from the project and the expectation was for the latest cohort to do at least the same again.
The latest cohort of five include Mafic, a startup that tracks workers on construction sites through a wearable device embedded in a safety helmet, EHAB, a weather risk management platform for the construction industry, Immense Simulations, a transportation and mobility simulator, Consequence, a net zero carbon accounting platform, and Silicon Microgravity, a ‘gravity sensors’ for measuring sub surface conditions.
If you are interested in learning more about corporate venture business developmenty we are holding a roundtable and discussion on this at the GCV Symposium in London on June 20-22. The GCV Institute also runs regular courses on how to land the value of corporate venturing.
