Corporate Venture Capital (CVC) is used by companies to make investments in external start-ups.
What is Corporate Venture Capital?
Companies employ Corporate Venture Capital (CVC) to invest in external start-ups. Companies often pursue CVC investments for strategic purposes, such as obtaining access to new technology, testing new business models, or entering new markets, in addition to the usual venture capital goal of earning financial returns across a portfolio of investments. In exchange, the startup may obtain access to the investing firm’s channels, clients, and expertise, in addition to financial resources. Minority investments can potentially be used as a springboard for future acquisitions by CVC.
How Is Corporate Venture Capital Implemented?
Managers who make successful corporate venture investments must:
- Create a distinct vision and investment strategy.
- Evaluate and target start-ups based on their level of synergy and ability to collaborate.
- Create an effective approval process to respond rapidly to investment offers.
- Develop an experimental, risk-taking mindset.
- Create systems for knowledge sharing.
What Are Common Uses of Corporate Venture Capital?
Corporate Venture Capital is commonly used for the following purposes:
- Understanding early-stage disruptive company models in core or adjacent markets
- Obtaining new technology, products, or services
- Making provision for future acquisitions
- Product, technology, or service development that increases demand for core businesses
- Investing resources and skills in another company in order to earn a profit
