Brian Walsh, Inorganic Innovation Lead. The GCVI Summit heralded the next generation of corporate venturing--mature organizations that have deep strategic roots in their parent companies and sustained engagement with their broader innovation ecosystems. It also introduced a wave of newcomers to the space, companies that can learn from these best practices.
The Next Generation of Corporate Venturing. Brian Walsh Inorganic Innovation Lead. Creating the Next Generation of Grocery Loyalty. Grocery retailers have long been masters of customer loyalty. But to compete against direct-to-consumer e-commerce startups, brick-and-mortar companies need to take a page from the Silicon Valley playbook and use digital technology to keep customers coming back.
We sat down at Shoptalk with leading innovators in food and beverage for a conversation about the key trends affecting startups and established companies.
A new strategy, corporate venturing, offers a way forward. Increasingly, big corporations balance entrepreneurship and strategy by turning to innovative start-ups. Simply put, entrepreneurial ventures contribute a growing fraction of current innovation. This can be attributed to a number of trends.
This case is ideal for use in courses on innovation, entrepreneurship, corporate venturing, and strategy. It challenges students to think about the conditions. Bryan Wolf, vice president and managing director of Intel Capital, and Mike Wall, Article originally published by Global Corporate Venturing.
It is an attractive first job to the millennium generation, and a viable second career for more experienced talent. Also, the cost of starting a business is falling due to a favourable technological and regulatory environment. Together, these trends lead to a growth in the number of start-ups and, importantly, the innovative potential they afford. There are at least three approaches to corporate venturing.
BBC Worldwide, along with its investment, licensed hours of programmes to Viki. Also, as with independent VCs , it seems that the high returns are concentrated in the most successful investors, with the majority of investors at best breaking even or losing money. However, portfolio companies interact more with their corporate investors with whom they share greater overlap. Because of concerns about misappropriation, though, the startups are more likely to employ safeguards i.
Finally, corporate investors rarely give their CVC group a "carried interest" i. Therefore, if the CVC managers become successful, they often jump ship and leave for jobs at independent VC firms.
The CVC literature is related to the corporate entrepreneurship and spin-out literatures. The former, also known as intrapreneurship, refers to various internally oriented activities, including investment in internal divisions, business development funds, etc. The two literatures diverge on a couple of fronts. First, a CVC unit targets external entrepreneurs, while corporate employees are funded by intrapreneurship initiatives.
Second, a CVC competes and invests along with other investors e. The CVC literature also differs from the alliance literature. Both serve a similar purpose: That said, they are distinct in the nature of the relationship and its organization Dushnitsky and Lavie Corporate venture capital, on the other hand, sees innate asymmetry between an investor and a funded venture, and involves a unidirectional flow of capital to a venture that independently performs its value chain activities.
Corporations are in and out all the time of the economic cycle, always at the wrong time. So they get used as cannon fodder. It's just the nature of how things get done…. There's so much history of venture capitalists abusing corporations and the corporations saying 'it's different this time' when it's not. We note that more CVC studies have been published in top academic journals over the last decade than in the previous four decades combined. Moreover, the topic draws interest from various disciplines including economics, entrepreneurship, finance, organizational theory, strategy, and others.
The growth drivers are twofold. First, the CVC phenomenon became more prevalent with many corporations across different sectors and continents pursuing CVC activity. Second, the introduction of the VentureXpert databases enabled rigorous statistical analysis, which resulted in higher level of generalizability of CVC research as studies address a wider set of causal factors and tackle unobserved heterogeneity.
Equally important, robust analyses have led to further theoretical development.
Although we know much more about corporate venture capital nowadays, there are a number of issues that merit further investigation. Many existing studies focused on the telecommunication sector and, to a smaller extent, the biotechnology industry. Future work should investigate the impact of corporate venture capital in other settings, such as chemicals and medical devices, as well as rapidly growing sectors such as clean energy.
Future studies could also systematically compare CVC patterns across sectors. Cross-industry comparisons are well positioned to highlight important boundary conditions. There is evidence to suggest that the higher the level of competition in its industry, the more inclined a firm is to pursue innovation through corporate venture capital e.
Other industry-level factors are also known to be associated with the pursuit of corporate venturing. Specifically, industries experiencing greater level of technological ferment, or weaker Intellectual Property regimes, are more likely to be home to CVC-investing firms. Corporate venture capital investments parallel these broader trends; it is increasingly more likely to observe corporate investors backing European- or Asian-based ventures. Future work should investigate what factors stimulate CVC investment across the globe.
Scholars could also distinguish between those factors that are driving firms' investment behavior i. Until now, the lion's share of CVC research has studied U. Research should examine how changes in the institutional environment affect CVC activity, since these can significantly enhance the attractiveness of CVC activity to a corporate parent.
Research could directly examine how knowledge transfer occurs in the investing firms studied to provide more insight into conditions under which investors actually derive exploratory learning benefits from such relationships Narayanan et al.
More research should focus on how investors manage their relationships with portfolio companies and the specific processes used by CVC programs to build and nurture such relationships, especially in light of the different motivations for CVC activity. From a venture perspective, researchers could also examine how internal characteristics e. Research should also examine how investor characteristics influence venture outcomes and the roles played by different investors in impacting a venture's performance.
Finally, the question of whether defense mechanisms or safeguards are beneficial in the long run needs examination. Although it is recognized that trust between an investor and portfolio company can substitute for formal safeguards Weber and Weber , the approach used by ventures to gain trust is not well understood. These new research questions underscore the need for broader methodological approaches to the study of corporate venture capital.
Case studies and survey-based work could, once again, play an important role in advancing CVC research. The study of corporate venture capital was first stimulated by the evidence reported in Siegel et al. The insights gleaned through these approaches offer rich and detailed information regarding the new issues and challenges facing corporate investors in the 21st century.
Similarly, formal approaches could further advance our understanding of corporate venture capital. Formal models have been instrumental in deciphering the ever-complex CVC phenomenon. A small body of work already tackles important issues such as the role of CVC in facing downstream rivalry e. Formal work has been particularly effective in unpacking the opposing forces a corporate-entrepreneur pair experiences in the market for capital and product markets e.
As CVC activity becomes more embedded with other firm activities, there are subtle interactions that can be further illuminated through formal approaches. Both are subscription-based and are quite expensive. At the turn of the century, we saw an increase in large-sample econometric analysis following the introduction of the commercially available database; VentureXpert. The database was offered by Venture Economics now part of Thomson One and focuses on comprehensive transactional data, namely the characteristics of the investment and the parties to it. Data is collected through multiple sources including the investment banking community, surveys of general partners and their portfolio companies, government filings, and industry associations European Venture Capital Association, National Venture Capital Association, etc.
Because each investment generates a unique record, the database contains full history of investors' investments in each venture. The National Venture Capital Association NVCA releases aggregated data on a quarterly basis, and this data can generally be broken out by state, country, region, stage of development early stage vs.
This data can be viewed by going to http: Crunchbase is good at providing specific transaction-level detail i. Geographical aggregation is possible, but must be undertaken by the user. The following are business school cases that cover corporate venture capital sorted by year. As you can see, most were written in the late s or early s. All are available and are free to educators after registering. More cases can be found on Gary Dushnitsky's website as well.
The company and the VentureXpert database were subsequently acquired by Thomson Reuters. Dow Jones purchased the firm in
Phelps, and Kotha, Suresh. Alvarez-Garrido and Dushnitsky find that CVC-backed biotechnology startups are more innovative than their independent VC-backed peers. These new research questions underscore the need for broader methodological approaches to the study of corporate venture capital. Article provided by Learn more. Finally, we have an idea of some good investor practices, such as investing in a syndicate, making related investments, adopting a nurturing attitude towards portfolio companies, and seeking access through Board memberships or observation rights.