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The case for corporate venture capital

…and how big corporations can engage in innovation through partnership with startups.

I have experience dealing with corporate venture capital (CVC) from one side or other of the table (being an entrepreneur who received CVC investment in my company and later on as a co-investor and partner with CVC) for more than 20 years.

I’ve witnessed good, bad and ugly experiences in dealing with big corporations’ CVC as a small startup, who has grown with them along the road until successfully selling my company.

I currently work with CVC in different industries like media, events, hospitality, travel or tech and enjoy the way that big corporations can add substantial value, industry expertise and validation to young companies who are disrupting their industries and fixing problems that the big guys are not able to on their own.

I have also seen the different ways that CVC funds are born, how they grow and evolve throughout the years and their struggle to find the right way to add value to investments and capitalize on those opportunities internally with corporation employees, board members and shareholders.

This month, I will have the pleasure of holding a very interesting event and conversation with Andrew Romans in Miami about his own experience and views about CVC, after just writing his own book on the subject.

There are many detractors that oppose the CVC model. Many smart and extremely respected VC’s like Fred Wilson (one of my favorite VC’s) have been very clear in their critical views that big corporations should simply do M&A and not CVC.

Nevertheless, CVC as a category continues to grow, mature and evolve not only in tech but now throughout many industries on a global basis, as CB Insights has presented on a regular basis.  CVC is not new, or just a “cool” trend as many of these stats validate. 60%+ of US unicorns are CVC backed, almost all Forbes 500 Global companies are using CVC or similar models (startup competitions, incubators, etc.) in some capacity to reinforce and accelerate their R&D and innovation initiatives. Many of the most successful and respected VC companies in the world like Kleiner Perkins, NEA, Andreesen Horowitz, Accel, Greylock, DFJ, among others are co-investing with CVC in a large percentage of their deals.

As an entrepreneur and investor, I have my own thesis about “the case for corporate venture capital,” and I’ve presented and discussed this topic at different conferences and forums, besides experimenting in real life in different startups where as an advisor, co-founder or board member, I have to deal with CVC on a regular basis.  My “long story short” about my thesis is pretty simple:

  1.  CVC is a great thing, if the corporation is seriously committed with CVC as a long term, strategic and important goal for the Board and C-level members.
  2.  CVC can validate startups, help them to accelerate their pilots and market strategy, as well as provide valuable industry expertise and distribution opportunities.
  3.  Successful CVC’s have clear innovation strategies and think long term regardless of their good or bad short-term financial results.

Like many other things in life, CVC can be a good or bad thing depending on the execution. The concept of big, slow, and mature corporations investing in young, fast and high-growth disruptive startups makes total sense if both sides are ready to do their part in the relationship to make it successful.

It’s very easy to complain about the lack of speed or flexibility of a big corporation if you are an entrepreneur running your startup, but it’s also convenient to complain about the lack of processes and industry experience if you are the big guy working with startups. Both opinions could be right or wrong depending on the mindset and attitude in the partnership. Both parts should embrace CVC if, and only if, they are ready to learn from each other, complement skills and opportunities together. This model can work- and when it works, it’s magical for all parties involved.

For many years now, we have been working together with different entrepreneurs, investors, mentors and now big corporations in South Florida, trying to bring about a better and more vibrant startup and entrepreneurship community. I have the pleasure of being a Board Member at LAB Ventures where we are working with many amazing entrepreneurs, co-building companies in partnership with corporations and CVC’s.

The company building or venture studio model is still in it’s early days. Some interesting experiences in the US and Europe are leading the way, helping startups and corporations partnerships to build new successful companies and products that are disrupting old and established business models. During the next couple of decades, we will see many failures and success stories and will continue to learn valuable lessons along the way. Events like the one we are hosting this month in Miami can help all parties involved to share their own views, experiences, concerns and strategic goals. The more open, transparent and constructive we are in discussing and sharing our experiences, the more benefit and added value will continue to be generated in the startup and business community, in each of the regions where this model is successfully executed.

If you are a corporate executive who is influencing the way that your corporation is innovating for the future or if you are an entrepreneur looking to partner with innovative corporations, you must be an active participant in this conversation. I hope that you can join us in the CVC and startup innovation movement and discover your own unique way to benefit from it.

Originally published on www.marcogiberti.com


Also published on Medium.

One Response to "The case for corporate venture capital"

  • Yelhsa
    July 2, 2018 - 1:06 am Reply

    I’m not easily impesrsed but you’ve done it with that posting.

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