Corporate venture capital

Résumé

Corporate venture capital (CVC) is the investment of corporate funds directly in external startup companies. CVC is defined by the Business Dictionary as the "practice where a large firm takes an equity stake in a small but innovative or specialist firm, to which it may also provide management and marketing expertise; the objective is to gain a specific competitive advantage." Examples of CVCs include GV and Intel Capital. The definition of CVC often becomes clearer by explaining what it is not. An investment made through an external fund managed by a third party, even when the investment vehicle is funded by a single investing company, is not considered CVC. Most importantly, CVC is not synonymous with venture capital (VC); rather, it is a specific subset of venture capital. In essence, Corporate Venturing is about setting up structural collaborations with external ventures or parties to drive mutual growth. These external ventures are startups (early stage companies) or scaleup company (companies that have found product/market fit) that come from outside the organization. Due to its hybrid nature involving both elements of corporate rigidity and startup culture, managing a successful CVC unit is a difficult task that involves a number of hurdles and often fails to deliver the expected outcomes. As Henry Chesbrough, professor at Haas School of Business at UC Berkeley, explains in his "Making Sense of Corporate Venture Capital" article, CVC has two hallmarks: (1) its objective; and (2) the degree to which the operations of the start up and investing company are connected. CVC is unique from private VC in that it commonly strives to advance both strategic and financial objectives. Strategically driven CVC investments are made primarily to increase, directly or indirectly, the sales and profits of the incumbent firm's business. A well established firm making a strategic CVC investment seeks to identify and exploit synergies between itself and the new venture. The Goal is to exploit the potential for additional growth within the parent firm.

Source officielle

https://en.wikipedia.org/wiki/Corporate_venture_capital

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Publications associées (19)

Personnes associées (3)

Unités associées (1)

Angel funding is an important source of capital for startup ventures (J. Sohl 2019), providing a similar level of capital as institutional venture capital (OECD 2011). But angel funding is challenging to study due to the informal nature of the activity. A common paradigm for new venture funding argues that new ventures initially fund their activities with angel investment and then, as they show success, make progress to commercialization and de-risk core venture propositions, ventures transition to more professional institutional (venture capital) funding. A belief in this paradigm can strongly influence early venture creation activities, and assumptions about the later availability of capital from institutional venture capital underpin many startup business plans. However, the literature exploring this phenomenon is very sparse, and the question of the relationship of angel to venture funding transition has rarely been studied. By analyzing a large and robust dataset, this thesis advances the understanding of the actual behavior of investors and the impact this early behavior, and the funding choices involved, have on company outcomes. This thesis also explores a novel form of venture investing and places it into a broader context of new venture funding that may help explain some of the key observations discussed. These fundamentally empirical studies examine the nature/reality of important entrepreneurial phenomena of interactions between angel and venture funding in novel ways, pose questions, and identify a set results that point to a potential market failure. Attempts are made to understand these results and place them into the contexts of both research theory and a broader understanding of entrepreneurial behavior; there certainly remain a set of unanswered questions and potential fruitful directions for future research.

EPFL2020

While established firms' relationships with external ventures may have significant strategic benefits, the realization of such benefits is fraught with considerable uncertainty. The real options and interorganizational learning literatures present an interesting trade-off for established firms regarding commitment of resources in a partnership. This study seeks to enhance our understanding of how firms manage these trade-offs when committing resources to external venturing initiatives. We examine the magnitude of resources initially committed by an established firm to an external venturing partnership in the context of corporate venture capital (CVC) investments. While a real options approach suggests that resource commitments should be lowered in the presence of uncertainty regarding realization of benefits, the interorganizational literature emphasizes that resource commitments may be essential for building quality relationships that expedite learning. Corporate investors, who invest in new ventures in order to gain strategic benefits, face higher uncertainty when their investment objectives involve greater exploration. However, greater exploration also increases investors' need to learn from their portfolio ventures. We, therefore, predicted that the degree of exploration would have a U-shaped relationship with the investor's resource commitment in a venture. We also expected that factors that serve to decrease the investor's uncertainty, i.e., investor experience diversity and venture affiliation to prominent venture capitalists, would moderate the U-shaped relationship between exploration and resource commitment. The predictions of the study are tested on a sample of 248 initial investments in private ventures made by incumbent firms in the computer, semiconductor, and telecommunications industries between 1996 and 2000. We find some support for our hypotheses. This study contributes to the external venturing literature on CVC investments by examining the determinants of the magnitude of resource commitment to new ventures, and integrates real options perspective, which advocates low resource commitments under uncertainty, with the organizational learning literature, which argues for greater resource commitment to secure partner cooperation. The results of this study reveal interesting insights into how CVC investors manage individual investments to generate strategic benefits.

Wiley-Blackwell2013

This study examines the relationship between a firm's venturing activities and its undertaking of strategic renewal. The study was motivated by some important gaps in the corporate entrepreneurship literature on venturing and renewal. The extant literature has not focused on the different types and dimensions of firms' renewal activities. In particular, discontinuous renewal involving shifts in firms' core businesses is not well understood. Moreover, the conditions that drive firms to undertake strategic renewal have not been examined. For example, it is not known how venturing increases or reduces the benefits of undertaking renewal. This study focuses on a discontinuous form of renewal involving major changes in firms' core businesses and examines firms' external venturing activities that complement their internal development. We examine corporate venture capital (CVC) investments, which are direct minority equity investments made by established companies in privately held ventures. Discontinuous renewal is conceptualized as resulting from a set of related, and often sequential, managerial decisions. The first managerial decision is to initiate growth in a business that is relatively newer or smaller for the organization. The second decision is to move away, or even withdraw completely, from the current core business that enabled prior growth and prosperity for the firm and served as its primary revenue earner. Employing a real options perspective, we argue that CVC investments create growth options in new and existing businesses but do not result in firms' withdrawal from existing businesses. Therefore, we expect CVC activity to be negatively associated with the likelihood of a firm undertaking discontinuous renewal. We also propose that the benefits of withdrawing from existing businesses are even lower, and the costs even higher, for firms in dynamic industries and for firms that possess strong internal capabilities. The predictions of the study are tested using longitudinal data on 477 firms from the 1990 Fortune 500 list for the period 1990-2000. We find support for all our predicted hypotheses. These results help address important limitations in the corporate entrepreneurship literature. The study also contributes to the real options and organizational capabilities literatures.

Wiley-Blackwell2013