Innovative businesses pose a constant threat to Corporations. Fact. But why is that? Well, you, as a younger, more agile, more creative, less bureaucratic business has the ability to move in almost any direction. You have innovation and creative thought. You have very little that confines you to a particular structure and model. You’re exploring, testing, creating. Your pricing is competitive, your team is strong and together, you’re building something pretty amazing.
And that’s why larger organisations are worried. You are able to move at a much quicker pace than they can. Unless, of course, they start to behave like you, learn from you and invest in you.
Introducing: Corporate Venture Capital.
We know that as a growing business, funding and future capital is probably the biggest challenge you face right now. Where to grow, how to grow, when to grow. Corporate Venturing was introduced (in concept) as far back as 1914 when a certain Mr. Pierre S. du Pont, president of chemical and plastics manufacturer DuPont, took a rather unorthodox step and invested in a still private 6-year-old automobile startup named General Motors. But just what is it that Corporate Venture investors look for in smaller businesses who are trying to make their mark in the world – and secure the funding, and future prospects, they need?
They’re looking for Diversity
The diversity of a founding team often plays a big part in investment decisions. And in Intel Capital’s case, it certainly played a critical role as one of the most active CVCs in the world with over $566 million invested in 2017 alone. In a recent interview with Christine Herron, Managing Director of Intel Capital and co-leader of its $125 million Diversity Fund, she noted that they purposefully select investment opportunities that display Diversity in their business as they are able to pull from a range of different backgrounds, experiences and skillsets – something that contributes to the overall business agreement, and the rest of the Parent organisation too. She went on to explain: “Each investor at Intel Capital looks for diversity no matter their vertical. The fund’s definition of diversity has expanded over the years. Herron explained, “We want to pay attention to not only women and underrepresented minorities. We are actively looking for people with disabilities, members of the LGBTQ community and those in military service.”.
They’re looking for Returns
Many, if not most, of today’s leading Corporate Venture Capital investment deals are structured with the clear objective of maximising financial return. And where financial return may not be the driver of the deal, but rather a strategic investment which allows for research or product development that the company could implement or use to improve its existing offerings, most investors, if not all, want to know about the numbers first.
In the same interview, Herron noted that, ““If the strategic value of the return isn’t demonstrated in some way, that deal is not going to get done”.
Teddy Himler, a senior associate at Comcast Ventures, echoed this sentiment when talking about a returns-driven investment opportunity: “With no potential for competing corporate interests, Corporate Venture Capital investors can tell a simple and easy-to-understand story to the entrepreneurial community: we are aligned with you to grow shareholder value.”
While many entrepreneurs feel the need to explain the rational behind their financial projections, most investors will want to know the numbers first, and how, together with them, your plan will be able to deliver a return – financial or otherwise, on their investment.
They’re looking for businesses who are market and trend-ready
Herron, in the same interview, mentioned: “Intel Capital has shown a lot of interest in companies that are data-focused, recently investing $60 million across 15 startups, and are particularly excited about companies that are creating natural interfaces for IoT. Natural interfaces, whether it is through ambient computing or voice-controlled devices like Alexa, are changing the way that humans interact with technology and making those experiences more natural.”
Corporate Venture Capital investors will be looking to invest in a business that that is core, or adjacent to the corporate parent’s interests. This relevance develops an almost-immediate relationship between target sectors of the parent organisation and the investment.
Corporate venture arms vary as to the types of deals they are looking for, but for the most part – they look for:
- Startups with high growth potential
- Startups with large addressable target markets
- Startups that may be complimentary to the business of the parent company of the venture arm, and it’s market
- Startups with a big financial upside
- Startups that may make sense for the corporate parent to acquire in the future
What is Corporate Venturing and how do businesses benefit?
Insight for those who are looking for investment opportunities and those who are looking to partner with corporate venture capital as part of their growth plan.