![]() He gives the example of Dell Ventures, Dell Computer's in-house VC division, which made multiple Internet investments with the expectation of earning favorable returns. Chesbrough points out that a company's brand may signal the quality of the start-up to other investors and potential customers this may eventually result in rewards to the initial investor. The CVC division often believes it has a competitive advantage over private VC firms due to what it considers to be superior knowledge of markets and technologies, its strong balance sheet, and its ability to be a patient investor. Specifically for CVC, the parent company seeks to do as well as if not better than private VC investors, hence the motivation to keep its VC efforts "in house". The objective is to exploit the independent revenue and profit in the new venture itself. The full potential of leverage is often achieved through exits such as initial public offering (IPO) or sales of stakes to third parties. įinancially-driven CVC investments are investments where parent firms are looking for leverage on returns. For instance, investing firms may want to obtain a window on new technologies, to enter new markets, to identify acquisition targets and/or to access new resources. The Goal is to exploit the potential for additional growth within the parent firm. A well established firm making a strategic CVC investment seeks to identify and exploit synergies between itself and the new venture. Strategically driven CVC investments are made primarily to increase, directly or indirectly, the sales and profits of the incumbent firm's business. CVC is unique from private VC in that instead or aside from financial return, it also commonly strives to advance strategic objectives. Objectives Īs 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. 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. ![]() These external ventures are startups (early stage companies) or scaleup company (companies that have found product/market fit) that come from outside the organization. In essence, Corporate Venturing is about setting up structural collaborations with external ventures or parties to drive mutual growth. Most importantly, CVC is not synonymous with venture capital (VC) rather, it is a specific subset of venture capital. 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. The definition of CVC may also be outlined by explaining what it is not. 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.ĬVC refers to the investment of corporate funds directly in external startup companies. ( August 2022) ( Learn how and when to remove this template message)Ĭorporate venture capital (CVC) is the investment of corporate funds directly in external startup companies. Several templates and tools are available to assist in formatting, such as reFill ( documentation) and Citation bot ( documentation). Please consider converting them to full citations to ensure the article remains verifiable and maintains a consistent citation style. This article uses bare URLs, which are uninformative and vulnerable to link rot.
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