What is Corporate Venture Capital?

Corporate Venture Capital (CVC) is used by companies to make investments in external start-ups. In addition to the traditional venture capital goal of generating financial returns across a portfolio of investments, companies often pursue CVC investments for strategic reasons, such as gaining access to new technologies, exploring new business models, or entering new markets. In return, the start-up may benefit not only from financial resources but also from gaining access to the investing firm’s channels, customers, and expertise. CVC can also use minority investments as a path to future acquisitions.

How Is Corporate Venture Capital Implemented?

Successful corporate venture investments require managers to:

• Define a clear vision and investment strategy
• Evaluate and target start-ups based on the level of synergy and the ability of the firms to work together
• Establish an efficient approval process to act quickly on investment opportunities
• Create an experimental, risk-tolerant mindset
• Establish processes to share knowledge

What Are Common Uses of Corporate Venture Capital?

Some common uses of Corporate Venture Capital include:

• Learning about early-stage disruptive business models in core or adjacent markets
• Gaining access to new technology, products, or services
• Creating options for future acquisitions
• Growing products, technologies, or services that increase demand for core businesses
• Investing resources and expertise in another company to generate financial returns

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Management Tools & Trends 2023

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