Corporate venturing involves larger companies investing in and supporting entrepreneurs, such as taking minority equity stakes, either directly or through venture capital funds, as well as other innovation tools, including incubators, accelerators and developing internal innovation – ‘intrapreneurship’.
Benefits of Corporate Venturing
Effectively, it’s about companies thinking about how they help entrepreneurs with their business needs of raising money, finding customers, developing their own products and services, hiring people and, eventually, an exit. In turn, the corporation receives the ideas and support for their existing business units and strategic and/or financial benefits for their own growth strategy and cost savings.
Leaders across the industry share their insights and expertise with their peers in ‘unpanel’ discussions during the 2021 GCV Symposium in London
Corporate Venturing vs. Venture Capital
- Venture capital refers to independent firms – called general partners – raising money from primarily institutional investors – called limited partners – to take minority equity stakes for purely financial returns. Corporate venturing can do this but can often also involve looking for strategic benefits and a greater range of support to the entrepreneurs and investor.
- Entrepreneurs looking to grow their business often require money to invest in hiring people, finding customers and developing their products and services. Banks can be reluctant to lend against new ideas unless there is collateral (an asset) to put against the debt and charge interest each year. By being equity, corporate venturing and venture capital has no demands on a startup’s cash but is rewarded if the business becomes more valuable in a sale and/or profitable to pay a dividend. Corporations can of course set up customer/supplier partnerships or lend money or have other claims on assets.
- The disadvantages of corporate venturing and venture capital is it can put pressure on entrepreneurs to grow faster and dilutes the stake of the founding and/or management team, and with preference shares can have an earlier claim on assets in a break-up.
The industry gathers in September 2021 at the annual GCVI Summit in Monterey, California, where up to 900 CVC leaders connect and network from all over the world
How Does it Help Large Corporations?
- Corporations are looking at ways to save costs and grow their revenues and realise that not all the smartest people in the world work for them to do this. Corporate venturing can help open the doors to this wider pool of talent and good ideas to help make their own business more efficient and successful and bring new opportunities for growth.
- Corporate venturing by relying on a relationship to be formed by two or more different businesses and their personnel is inherently at risk of conflicts of interest or diverging strategies to develop, as well as internal corporate challenges from business units or other teams looking for greater resources and/or power in an organisation.
Can it help Small Businesses too?
- Corporate venturing can aid small businesses by bringing some or all of capital, customers, product development, hiring and an exit. However, it can leave the entrepreneurs vulnerable to unequal demands on their resources and a lack of alignment of interest in how both sides can benefit.
- The Global Corporate Venturing website is the source of news, data, and analyses allied to the events hosted by Global Corporate Venturing in Asia, North and South America and Europe and training through the GCV Institute. The book, Corporate Venturing: A Survival Guide, published in 2019 offers a history and primer on developing a successful program for longevity with case studies.