Many large corporations have set up, or are in the process of setting up, in-house venture funds. At the same time, early and later-stage companies are looking for “smart money” investors – funds that bring strategic and operational help along with cash. Are corporate venture funds the perfect match?
Yes and no. Corporate venture funds can provide industry expertise, market intelligence, production know-how and capabilities and distribution channels, in addition to funds. They can validate a company’s technology and market opportunity. These attributes also make corporate VC funds attractive for VCs, who see participation by corporate venture funds as mitigating risk, lowering capital requirements and providing expert partnerships. So what’s the problem?
Not all work out as planned. Many great partnerships between corporate VC funds and growth companies have produced excellent outcomes, but many others failed. The following are some reasons why:
Corporate VCs are here to stay – and are likely to grow in number and importance. But a careful look is required – at the corporate investor’s track record and investment philosophy – before entering into the relationship.