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Benefits
of
Investing in External Ventures |
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Increasing
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innovativeness
 . Corporate
venture capital investment is associated with the creation of firm
value. This relationship is most salient in certain industries, in
particular, within the devices and information technology sectors. The
contribution of corporate venture capital investment is strongest when
it is focused on attaining a window on technology rather than purely a
narrow return on investment.
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2 Basic Business
Growth Strategies
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Value Innovation:
Yin-Yang Strategies
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Cutting out own comparable
research effort
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Cementing relationships,
developing external ventures as customers, marketing partners, or OEM
manufacturers
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Getting preferential treatment
in areas such as pricing, distribution rights,
licensing technology, or
company acquisition
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Learning and understanding new
business dynamics in order to identify new market or technology
discontinuities that may change current product or service requirements
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Converting equity into cash at
the start-up's
IPO
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Why Do Corporations
Invest in
External Start-Ups?
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3 Strategies of
Market Leaders
Corporations are a major - and rapidly growing -
source of funds for new ventures. In today's
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new entrepreneurial economy, the real shareholder value is created by
companies whose corporate strategies include well-developed
venture strategies.
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3Ws of
Venture Investing
Partnership between small innovative firms and large corporation is mutually
beneficial. While entrepreneurial companies can
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discover technology
and
market opportunities and
move faster to capitalize on them,
they can achieve enormous leverage through technology and distribution
agreements with large global corporations...
More
Strategic Considerations
Strategic benefits of corporate venture
investing may include:
Passion-driven
Fear-driven
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Reducing the risk of missing a new turn in
technological development
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Preventing competitors from acquiring a
breakthrough technology
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Motivating
internal talents to outperform outside ventures
A Strategic Investment
Corporations that have stayed the
course with venture investing tend to make equity investments in innovative
startup companies with strategic rather than simply financial motives. They
exploit synergies between what they are doing and what the investee
companies are doing. In time, they reap both strategic and financial
benefits as they create actual value that in turn is translated into
superior financial performance.
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