Don’t get too big too fast in CVC

In the era of AI megadeals when the media seems to celebrate the creation of ever-larger funds, it feels a little counterintuitive to say that in CVC it might be better to grow slowly.  

But that was one of the messages that came through in our webinar this week, looking at how CVC teams should navigate the difficult “expansion phase” — that tricky middle bit, usually in years four to six, when the team is past the early startup phase and now comes under pressure to prove its value to the company.  

The early years startup phase (which we explored in our webinar Launching a CVC: startup fundamentals) can be largely about generating some corporate enthusiasm and momentum around investments. The expansion phase starts to bring more nuanced and difficult questions: are any of the startups creating strategic value for the parent company, how is the portfolio performing financially? A new CEO, CFO or CSO might have rotated in and start asking why the unit was formed in the first place.  

Good answers to all that will help, but so will keeping the team lean and highly efficient. Travis Bales, managing director at Booz Allen Ventures, told the webinar audience how the team has deliberately stayed as a “low volume shop” doing just four to six deals a year, despite the heightened activity in the defence tech sector. At this level, Bales said, it is possible to do a thorough job of connecting startups in the portfolio to the parent company and really solidifying the gains from the investments.  

Lukasz Garbowski at Btomorrow Ventures, the investment arm of British American Tobacco, meanwhile said that they had learned that CVC simply can’t move at VC speed on deals if it wants to make sure there is real alignment with the corporation. That’s a feature, not a bug, in CVC. The BTV team now starts conversations with startups much further in advance of funding rounds and spends more of its time on what happens after the deal is done. 

More corporate venture units are now arriving at this expansion phase, given that the latest big wave of CVC growth came around 2019. And so, it is becoming more important to take a sounding of what is happening globally across CVCs. How are the units that made it this far now operating? Who are they reporting to? How big are the teams and portfolios? How have goals and operating models evolved? How many now have platform development functions?  

Understanding where your unit stands relative to global peers has never been more vital. That is why we are asking all corporate investors across our community to take part in The GCV Keystone Survey 2027. Even if you have filled the survey out for many years in a row, we’d urge you to do it once again so we can track what is changing and feed that back to the community. What was the global norm in 2023 won’t be the same in 2027.   

CVC survival also depends on having the right team — and we’d like to celebrate the individuals responsible for that. Nominations are now open for our annual Rising Stars and Emerging Leaders list, where we recognise outstanding early and mid-career CVC professionals who are shaping the future of corporate investing. If you work alongside an exceptional colleague or peer who is driving real operational impact, we want to hear from you.

This editor’s note was first published in GCV’s Blueprint newsletter, which tracks corporate venture news, key deals, new funds best practice and jobs.

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