How to pitch a corporate venturing unit to your board by Chirag Patel, managing director and head of corporate ventures, Highnote Foundry.

In the blink of an eye, entrepreneurs are turning their ideas into billion-dollar businesses – disrupting entire industries and creating new ones. This environment can present both new growth opportunities and competitive threats to established corporations.

So how do established companies keep up with and respond to this environment? The key lies in applying a new strategic approach to identifying and nurturing growth opportunities and uniting stakeholders around making growth a core part of their business. Corporate venturing is one of the methods that should be pursued as part of this approach.

Making the case for establishing a corporate venturing function requires a well-developed strategy and operating plan – one that defines the corporate venturing objectives against other venturing methods, such as establishing an incubator or accelerator. This corporate venturing architecture must align to corporate strategic growth objectives and be supported by a strong financial business case.

Before making the case for a corporate venturing unit to the board, CEOs should capture input from and build alignment with key internal stakeholders, including division and business unit heads that may view corporate venturing as more of a threat than an opportunity. The CEO must define the urgency and rationale behind the strategy – including how existing businesses can benefit from insights gained from working with external entrepreneurs.

Once internal alignment exists, the CEO can engage the board and make a case with conviction by addressing the what – the opportunity – and the how – the strategy – and covering the following topics.

  • Create a sense of urgency: Communicate that corporate venturing is no longer a nice-to-have but a must-have, while keeping the board’s contending motives and objectives in mind. To do this, articulate the implications of emerging threats and opportunities to the core business, the environment in which they operate and the industry as a whole.
  • Educate the board: Point out the differences between a corporate venturing unit and a venture capital firm. Hint – corporate venturers have fundamentally different objectives, measures and financial returns. Articulating this at the beginning will set the right expectations.
  • Do not let fear get the best of them: Illustrate how emerging companies might create new growth opportunities or present a threat to the core business today and in the future. Use analogous and timely industry examples of how well-established companies and their ecosystems are already being transformed by disruptive new business models.
  • Point to the new cycle of innovation: Emphasise the pace of change. Provide examples where entire industries are being transformed and established companies are being replaced by faster, nimbler startups that are well funded – and it is happening faster than ever.
  • Review past venturing programmes: Identify why past venturing programmes may have failed and how those failures will not be repeated. Clearly define your strategy, measures, governance models and organisational alignment in a well-organised operating model so that the board knows your plan from the start.
  • Set clear expectations: Define how the corporation will benefit, both financially and strategically. The business case should define where to invest, how far from the core business to invest, what stage to invest, how commercial benefits can be captured, how the corporate venturing unit will be organised, how existing business units will participate, or not, how much capital is required and the expected financial return.
  • Explain the numbers: Communicate what the short and long-term financial returns and operating expenses will beand where the funding will come from.

In today’s business landscape, the corporate venturing function is no longer a nice-to-have. Established companies must embrace the new competitive environment and see it as a growth opportunity. CEOs can convince key stakeholders, including the board, that this is the case with a robust strategy and rationale and a well-defined operating model.

Given strong interest in forming new funds, the GCV Academy is taking place in London on 20 and 21 January. We then have the fundamentals of corporate venturing programme in Silicon Valley on 5-6 February.  There is also a planned Masters program on 9 February in Newport Beach, with details to come soon.