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

Related Topics

• Corporate Entrepreneurship

• Open Innovation

• Strategic Alliances

 

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

• Selected references (click to expand)

  Alemany, Luisa, and Job J. Andreoli. Entrepreneurial Finance: The Art and Science of Growing Ventures. Cambridge University Press, 2018.

  Chesbrough, Henry. “Making Sense of Corporate Venture Capital.” Harvard Business Review, March 2002.

  Cumming, Douglas. The Oxford Handbook of Venture Capital. Oxford University Press, 2012.

  Flesner, Patrick, Michael Wade, and Nikolaus Obwegeser. “Making Corporate Venture Capital Work,” MIT Sloan Management Review, June 18, 2019.

  Lerner, Josh. “Corporate Venturing.” Harvard Business Review, October 2013.

  Zahra, Shaker A., Donald O. Neubaum, and James C. Hayton. Handbook of Research on Corporate Entrepreneurship. Edward Elgar Publishing, 2016.

  Weiblen, Tobias, and Henry W. Chesbrough. “Engaging with Startups to Enhance Corporate Innovation.” California Management Review, February 1, 2015.

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