#1: Introduction to Corporate Venture Capital (CVC)
Hi, I'm JP (Jeppe) and welcome to my weekly newsletter on Corporate Venturing, released every Tuesday. My aim is to provide a comprehensive perspective on the latest developments in the field and its related topics, drawing from the insights of top management, venture capitalists, founders, LPs, and family offices. I aim to offer valuable information and thought-provoking content that will aid in understanding the importance of Corporate Venturing in business strategy.
About this newsletter
With over 15 years of experience in the venture capital space, I have had the opportunity to witness a significant evolution in the industry. Despite the proliferation of venture capital firms in recent years, I have observed a relative lack of participation from Corporate Venture Capital entities in Europe. In light of this, I have chosen to share my insights on the subject through a newsletter series, with the aim of encouraging more corporations to consider venture capital as a strategic component of their operations.
Asia dominates early- and mid-stage deal share, the US leads late-stage. / CB Insights
What is Corporate Venture Capital?
Corporate venture capital, or CVC, refers to investments made by corporations into startups and early-stage companies. This type of investment allows corporations to stay on the forefront of innovation and tap into the resources and expertise of startups. It also provides startups with access to the resources, networks, and expertise of established corporations.
There are several benefits of CVC for both startups and corporations. For startups, CVC can provide access to capital, resources, and expertise that may not be available through traditional venture capital firms. It can also provide a strategic partnership and potential customer base for the startup. For corporations, CVC allows for the identification and investment in emerging technologies and business models that can potentially drive innovation and growth within the corporation and potentially avoid disruption as seen in companies like Nokia, Yahoo, Kodak etc.
However, CVC also carries its own set of challenges and risks for corporates. Due diligence is crucial in CVC investments, as the startup often must align with the corporation's business strategy and objectives. It is also important for corporations to establish clear governance and ethical guidelines in CVC investments.
CVC can take on various forms, such as an in-house team, a corporate fund, or a joint venture with a venture capital firm. Most corporates have BD/Strategy Teams and dependet on sector they might also have R&D Labs. As corporates grow in size they often include a M&A department. The venture part of corporates are often associated with activities within Incubators (a program providing support and ressources to start-ups), Accelerators (the support and development through mentorship of start-ups) and CVC (direct investment activities).
The overall difference between a traditional VC and a CVC
Pitching to CVC investors can differ from traditional venture capital, as the focus may be on the potential strategic value of the startup rather than just financial returns. This is an essential part of the corporate strategy. My own experience tells me that the best outcome is if both strategic and financial returns are prioritized. Intellectual property and global expansion can also be key considerations in CVC.
In addition to the benefits and challenges of CVC, it is important to consider the impact of CVC on corporate culture and how to spread it across the organisation so that insights are shared.
Overall, CVC is a complex and dynamic area of investment that offers unique opportunities and challenges for all stakeholders, including top management of large corporates, family owned businesses, venture capitalists, startups and founders.
In my next newsletter I will be focusing more on the benefits of CVC for both corporates and startups, including access to new technologies, markets, and talent.
Best regards,