CVC Unplugged: The corporate is the body, the CVC is a transplant.

When Jeppe Hoier first considered working at a corporate VC unit, he was sceptical. The general opinion about venture capital’s corporate cousins was not overly favourable at the time. This particular corporate, however, was a special one for Hoier, whose mother’s side of the family comes from the same hometown where it originated. It also didn’t hurt that within Denmark, Maersk’s name is a very attractive one.

Hoier left Maersk Growth, the logistic giant’s CVC in 2022 and is now venture partner at VC firms Antler and Upfun.vc, but his nearly five-year tenure at the CVC left Hoier convinced of the benefits that a corporate investor can bring to startups. But this didn’t happen right away.  In the beginning, the CVC unit was set up to have space between it and the parent company — to avoid the kind of corporate interference that has given corporate venturing a bad name in the past.

“That was also how we constructed Maersk Growth in the beginning. But then slowly over the years, I got to learn the big stuff and the great stuff that CVC can do,” he says on the CVC Unplugged podcast.

When Maersk growth first started, there was not enough communication between the C-suite and the unit, says Hoier, but that changed with the arrival of a new unit chief, Shereen Zarkani, who joined in 2020 as an internal hire, previously having been VP and global head of sales at Maersk.

After her arrival, the unit began to collaborate more openly with business units, and Maersk Growth’s investments were suddenly getting exposure to the rest of the business.

A corporate is a body

A major challenge, as Hoier sees it, is getting the venturing unit to engage with the rest of the business to leverage all the advantages that a large corporate can bring to its startups.

“When I describe what is needed for corporate venturing to succeed, I describe the corporate as the human body,” says Hoier.

The C-suite and the board, he explains, is like a brain. The brain knows something is sub-optimal and needs changing, whether that is the need to adapt to a new technology, a new business model, or adjusting to some other kind of disruption. It needs a CVC, but an organism does not always welcome a new element.

“I describe the corporate venturing unit, whether it’s clienting or investing, as an organ transplant – you’re putting something into the body that [was] not there. The immediate response from the body is: this is not invented here, it’s a bacteria, it needs to leave. It will fight it unless the head [says] I need to eat this medicine,” says Hoier.

The metaphor illustrates the crucial nature of having buy-in from the upper level. Unless the central coordinating organ is on board with, and communicating about, the benefits of the “transplant”, it will reject it.

Nordics and financials

“in Denmark, we have had a lot of CVCs. Many of them have folded,” says Hoier. In addition he cites recent research showing that 82% of corporate VC units in the Nordics are funded from the balance sheet. A mistake that many of them are making, as he sees it, is leaning too heavily on the strategic side of the spectrum, at the expense of financial returns.

“The most important outcome of the investment into corporate venturing is strategic, but there is no strategic good outcome without a financial. For me, they are interlinked.”

Hoier recommends what is becoming a more common strategy –  new units starting off by making some fund-of-fund investments to gain exposure to, and knowledge about, a sector, slowly building up confidence to make direct investments. If nothing else, these could also contribute to bringing in some easy wins to kick things off.

“One of the things that I could have done differently when I look back, is trying to get some more financial gains early on to show the CFO that it’s actually quite lucrative.”

Ultimately, to a multi-billion dollar multinational, the financial returns a CVC brings may be a rounding error, so the lasting value will come on the strategic side, but it’s still important to prove you’re not just a cost centre.

Having to shut down because you neglected the financial side, says Hoier, affects not just you, but the ecosystem you took part in – a founder inviting you onto the cap table is a massive responsibility that Hoier says needs to be taken seriously.

“When you see some of the older CVCs out there like Qualcomm and others, they are successful. They have given financial returns. So for me, it is, go out there, get some returns, but make sure that you have this strategic plan, specifically made with the CFO who will be the one, throwing the knife at you when it’s a cost-cutting time.”

Now’s the time

CVCs get set up cyclically, says Hoier, with many of them being set up when the market is high. But VC is a counterintuitive business, and people undervalue how much opportunity there is in the troughs. While he is no longer in corporate VC, he says that now is the right time for larger organisations to consider getting started.

“There’s a lot of corporates that join the venture world [in good times]. That also means that they are paying extremely high valuations for the investments. So actually, if you are out there now considering CVC, it’s the right time.”