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Corporate Venture: Are We Ready for A Revival?

by Stefan Lindegaard
January 20, 20131/20/13 3 Comments

Not yet. We still need to get out of this mess, but when this happens, I think many companies will revert to this innovation tool to drive growth.

However, corporate venture has had mixed results in the past and many companies have parted with the people having the knowledge and skills necessary to make corporate venture successful. This can make it difficult for innovation leaders and one of their key focus areas should be on the structure of corporate venture especially as this in many ways will merge with open innovation efforts.

On the structure of corporate venture, I can recommend a great read by Joachim von Heimburg, a very experienced innovation practitioner with a global perspective as he has worked in Europe, the U.S. and the Middle East.

In his article, Driving Innovation by Corporate Venture: How to Master Governance and Culture Challenges, von Heimburg argues that the key challenges evolve around the pre-exisisting governance processes and culture elements within big corporations as they did not come to life with the overarching objective of making corporate venturing successful.

He writes “When a corporation starts a corporate venture function a lot of money is at stake in addition to the reputation of the company itself. Corporate venturing is a very public activity – so failures and shortcomings are widely visible. In addition the venturing community is relatively small and tightly knit. Any blunder will be quickly talked about in many circles and institutions. So it is critical to decide on good governance standards and compliance procedures and have put them in place when corporate ventures go live.”

von Heimburg looks into these governance vectors that he believes are very impactful for the success or failure of corporate ventures:

Who ‘owns’ the money financing the corporate venture fund?

Who calls the shots?

How to ensure appropriate controls?

How to manage expectations?

Besides von Heimburg’s great insight, I can also suggest these reads on or related to corporate venture on my 15inno blog. The comments on both posts are very insightful.

Is Corporate Venture Dead? Is Open Innovation the New Thing?

Big Numbers Kill Innovation

Let me know if you can share other good resources on the topic.

Currently there are "3 comments" on this Article:

  1. Shaun says:

    All good reasons for concern, Stefan.

    But I cant help being excited about corporates embracing venture models again. Many ideas are more likely to succeed if founders are free to operate outside of the day-to-day business and I think the venture model is a great way to make open innovation work (many ideas wont fit into IP transfer models).

    The good news, is that I dont think new corp venturing will look anything like it did in the past.

    For one thing, early stage investing has been completely transformed by networks that emphasize key resources and mentoring over money (techstars, ycombinator, various angel networks and angel.co).

    Further, the scale of bets in financial terms, can be much smaller, so downside is reduced.

    Finally, I think public perception of brands taking risks has changed too. Any negative PR can now be countered, not just by the firm, via social channels, but also by other stakeholders. But also, I think there is an upside to trying in public in a way that generates, at a minimum, communication benefits.

    As to models, a couple come to mind that might be worth a deeper look to share how they address the concerns you have raised and how they embrace some of the changes in venture investing in general:

    Google as a general model – http://www.googleventures.com/
    GE Ecomagination as a dealflow sourcing model – http://challenge.ecomagination.com/home
    Nike (in partnership with Techstars) – http://nikeaccelerator.com/

  2. Ricardo dos Santos says:

    Nice posts on Corporate Venturing Stefan.. there is a conference coming up in Newport Beach dedicated (mostly) to the subject

    Reasons for having a corporate venture arm include market intelligence (Qualcomm, STMicro), ecosystem development of existing core platform(s) (Microsoft Emerging Business Programs), and "try before you buy" M&A deal flow (GE?) – The strongest reason to have corp VC arm would seem to be the third, however, its tough to syndicate deals with other angels, VC's (or strategics for that matter), when the strategic investor has an agenda beyond financial returns.

    Models seem to be emerging – I certainly think investing in startups or collaborating with accelerators should be part of a broad open innovation program.. you absolutely need to systemically listen to external stimuli (business & gov trends, user preferences and new technologies) to understand when it's time for the big pivot or complete abandonment of existing business models.


  3. Alexander says:

    Riccardo as you mention accelerators, for a CVC's it can represent a enormous risk and cost reduction to invest primary in accelerator funds or IP commercialization companies rather than engage in direct adventurous where as Stefan points it out the public will be aware of any failure.

    Here the corp. can easily pic at a later stage the businesses which offer the most and best benefits for their own strategy. As those fund invest in up to 20 to 30 project per year the chances are by far higher to find the right one.