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 and 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.
Corporate Venturing vs. Venture Capital
- Venture capital involves taking 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, 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.
- 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.
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.
Corporate Venturing Resources
- The website Global Corporate Venturing 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 Academy. 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.
Subscribe to Global Corporate Venturing here or to join the GCV Leadership Society contact firstname.lastname@example.org to discuss member benefits.