[VC Unlocked] 500 Startups' 2019 CVC Report

TL;DR

Corporate venture capital (CVC) units face challenges in securing internal approval, evaluating strategic returns, running pilots, maintaining long-term commitment, and providing useful support to startups. Different CVC types prioritize financial or strategic returns, have corporate or entrepreneurial culture, and can be autonomous or integrated with the parent organization.

Transcript

plug i'd like to introduce you all to vj and alba it's my pleasure vijay is 500's director of innovation and partnerships focusing in corporate innovation and alba is the manager of innovation and partnership is a manager of innovation and partnerships specifically in startup ecosystem development and with that i'm going to go ahead and pass it off... Read More

Key Insights

• 🎨 Prioritize financial or strategic returns and design the CVC unit accordingly.
• 😤 Develop partnerships to accelerate team learning and access better deal flow.
• 📱 Provide smart and strategic capital, offering scaling capacity and other strategic incentives.
• ↩️ Measure return on innovation, including gains, savings, and strategic insights.
• ❓ Integrate investment activities into a wider corporate innovation framework for better outcomes.

Questions & Answers

Q: Why do many CVC units struggle with securing timely internal approval for investments?

Some CVC units face challenges due to a lack of clear decision-making structures, requiring multiple consensus decisions, or needing approvals from several different bodies or departments. All of these factors contribute to a longer investment decision-making process.

Q: How can CVC units evaluate the strategic returns of their investments?

Evaluating strategic returns can be challenging for CVC units as they often don't have clear metrics or measurements. CVC units should consider measuring the impact of their investments on the parent organization's bottom line, such as growth, revenue, new market entry, and reputational gains. Additionally, measuring returns on innovation, including customer insights, new technology trends, and savings to the parent organization, can provide a more holistic evaluation.

Q: What are the common challenges faced by CVC units in running pilots and proof-of-concept projects with startups?

CVC units often struggle to coordinate and internally orchestrate their own corporate structures when running projects with startups. This can be due to a lack of clear decision-making processes, no defined procedures, or multiple approval points. Improving coordination and establishing clear processes can help overcome these challenges.

Q: Why do some CVC units struggle with maintaining long-term commitment to investment activities?

CVC units often have short mandates, usually around four years, compared to traditional venture capital firms that span a decade or more. This short timeframe, combined with the difficulty of measuring strategic returns, can lead to units being shut down before demonstrating their strategic value to the parent organization.

Q: What are startups looking for when working with corporates through CVC investments?

Startups are looking for global expansion opportunities, deep sales and distribution expertise, and sourcing assistance for talent. These are the top three things startups seek when collaborating with corporates, along with other important factors such as networks, knowledge, R&D support, and additional strategic insights.

Summary & Key Takeaways

• CVC has become increasingly important, with 23% of venture deals having corporate participation.

• CVC units can take different forms, from ad-hoc balance sheet investments to separate dedicated funds.

• Common challenges for CVC units include securing internal approval, evaluating strategic returns, running pilots, maintaining long-term commitment, and providing useful support to startups.