This month marks the transfer of power in China’s political leadership and another term in office for Potus – President of the United States. Or, with some hyperbole, what US media groups such as Time magazine call leaders of the Free and Unfree.
Corporate venturing exists in no bubble secluded from politicians. The political leaders in the US and China will shape whether China’s economic slowdown continues and how the US deals with its fiscal cliff when tax breaks end and spending cuts potentially begin at the start of the new year.
In Europe and emerging markets, politicians are perhaps equally important in affecting their people’s futures.
However, while some European countries, such as Spain, grapple with unemployment rates of more than 50% for young people, in parts of Africa, Asia and Latin America better governance is leading to economic growth and the reaping of a demographic dividend, and, in turn, innovations across a range of sectors.
Given that venture investing has historically been a procyclical
activity, even modest global economic growth over Barack Obama’s four-year term as US president or the decade in power for the next leader of China, Xi Jinping, will provide a tailwind to corporate earnings and start-ups, though not necessarily to all.
The second tailwind for corporate venturing could be the economic argument that in western countries the increase in debt levels will be modest over the next decade compared with the period up to the credit crunch in mid-2007.
If so, chief executives, especially in financial services – this month’s featured sector – will be thinking more about how to grow their equity value through innovation, especially using technology to find and develop new products or services or apply new models to earn revenues and profits.
There is a debate about the best ways to do this, such as increasing research and development budgets, investing in corporate venturing or striking acquisitions or joint ventures, but most groups will end up using a combination of them all, especially if shareholders and stockmarket analysts demand a robust innovation strategy.
For emerging markets, the debt levels are relatively lower so it could be that corporate venturing will compete for attention from chief executives and investors wanting to find assets to leverage.
However, the global nature of the opportunities and threats thrown up by innovation will mean corporate venturing remains a tool in the executive kit and emerging markets make up about a third of the programme launches tracked by Global Corporate Venturing over the past two years.
This data has underpinned excellent analysis by Boston Consulting Group on why the latest, fourth wave of corporate venturing is different and here to stay.
While “this time is different” are probably some of the most expensive words ever uttered, the arguments for corporations becoming increasingly active in the entrepreneurial ecosystem are powerful and borne out by facts – for the first time in 40 years, corporations are investing at the start of the economic cycle.
But with competition and illiquid private markets, where the best entrepreneurs can scoop a market, comes a premium on the best managers able to build a venturing team and work with business units at parent corporations and with start-ups.
In this business, therefore, it really is all about the people.
So this month we will be running a special supplement, the Powerlist 100, looking at the top 100 corporate venturing leaders and powerbrokers. Let us know who you think will be number one!
In addition, we are running our annual, four-question survey this month. Follow the link.
Selected answers – anonymous at your request – will be published in December’s and January’s issues and will help shape our agenda for next year – thank you in advance.
Most read stories on Global Corporate Venturing in October 2012
1 Lynch takes gun to venture knife fight
2 BVCA makes Askew CVC head
3 Globalisation of innovation: Heptares
4 Japan looks to corporates
5 Intel leads way to new order
6 Singapore’s siren call
7 M&A vs VC: Nemesis will follow hubris
8 Volvo sets up in North America, eyes Asia
9 The big deal: Lifelock breaks corporate IPO frost
10 Merck commits $250m more to venturing