Corporate venture capital is seeing an unprecedented growth. Even though there are concerns over investment in startups by companies, venture capital markets are becoming irrationally exuberant as the large corporations are not showing any signs of doing away with their venture investing activities.
Corporate venture capital is generally understood to be some kind of equity investment that has been done by a corporate fund, or even by some designated investment entity, into start-up companies. This is not like the traditional venture capital that has the objective of achieving higher financial return. Rather, the corporate venture capital is focused on providing financial return for their corporation. Increasing cash on their own balance sheets makes them look towards taking some risk in exchange for getting high returns. Next, it gives them access to strategy developing capabilities of the parent company that may align with their long-term strategy. There will be focus on various aspects of the strategy in order to see how these can adapt as well as evolve over time. Such a strategic investment is designed to identify as well as amplify synergies between the parent company and the venture. In order to do so, it may have to provide management skills and such other forms of expertise to the investee. There is also an increasing emphasis on issues such as CSR or sustainability that are now maturing and becoming a part of the strategic imperatives of that company.
The emergence of corporate innovation strategies has been particularly intensive in technology. You can see that most of the technology companies have corporate venture groups. Even Twitter has its own venture arm known as Twitter Ventures, which made its first investment into the open-source mobile operating system, known as Cyanogen. Hence, it is very clear that even the big tech companies understand the need of having venture arms today, and because of this need we at The Cribb launched the Corporate Venture offering to cater this growing gap.
The main aim behind The Cribb’s Corporate Venture is to help companies with traditional business models slowly adapt and understand the dynamics that vibrant and young startups work in, and also if they wish to invest in any.
The other reason is that, as know we, companies intend to use a portion of their profits to explore promising innovations. This allows talented startups to test ideas at a huge scale, with large corporate ventures arms investing in them. This way they are also trying to discover synergies that can help them with their existing businesses and increase value.
Corporate venture investing can be seen thriving in tech, health, and energy sector. It is also being seen in consumer services and retail too.
Since financial objectives will always remain necessary in order to maintain internal support, corporate ventures will help in meeting strategic objectives that will always be vital for achieving long term success for both parties. While financial metrics are well-established, strategic and financial outcomes are to be balanced as there are a number of ‘intangible’ returns that may be difficult to quantify. Hence the success rests here on both strategic as well as financial metrics.
Corporate Venturing is increasingly becoming an important internal business development activity that identifies and accelerates ideas. To some companies, it really either makes or breaks their businesses.