2/12/2018 Is there an opportunity to help large companies establish corporate venture arms? What am I missing? How am I wrong?

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2 Answers

Paul O'Brien, CMO to VC

Answered Apr 3, 2017

Is there an opportunity to help large companies establish corporate

venture arms? What am I missing? How am I wrong?

To know what you’re missing, we’d have to know what you’re thinking. So let’s
take these one at a time.

Is there an opportunity to help large companies establish corporate

venture arms?

Not as much as you might be thinking.

Corporate venture capital is very different from traditional venture capital in

that you might say it’s an unusual blend of Angel Investment with Private
Equity More Related Questions

In the non corporate sector, three primary investment sources play their role in
Question Stats
turn:
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1. Angels 741 Views

2. VC Firms Last Asked Apr 3, 2017

Edits
3. Private Equity

Fudning and financing startups is much more nuanced than that:

1. Credit cards and cash reserves

2. Friends and family

3. Crowdfunding

4. Banks

5. Incubators

6. Equity crowdfunding

7. Angel Groups

8. Angel Investors

9. Venture Capital firms

10. Private Equity

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2/12/2018 Is there an opportunity to help large companies establish corporate venture arms? What am I missing? How am I wrong? - Quora

To understand Corporate interests, you have to focus on their intentions and

goals, they are not investors in a traditional sense:

Incubate ideas

R&D

IP commercialization

Hiring

Public relations

Acquisition

Now, of course you can find exceptions to my rules but generally speaking, that’s
how it works.

Corporate VC doesn’t behave like nor have the same expectations and what most
conceive of when we think VC.

How does it get started?? Usually it’s a division of their Business Development,
R&D, or Corp Dev teams. Occassionally it is a pet project or push by the
founder/CEO. The Directors involved have very different jobs than GPs in a
Venture Capital firm.

So is there a way to get them going? If you’re in the company, build your
experience and reputation for finding great people, ideas, and profitable
opportunities. Get to know the executives involved therein and start socializing
the idea of doing that regularly. If you’re external to a company and might
remain so, you’re a consultant and can be highly valued, for the same reasons.
Offer a framework for hw corporate VC works and find the execs looking to take
the risk!
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Georges Van Hoegaerden, Managing Director @ The Venture Company |

venturecompany.com
Answered Apr 3, 2017

Yes, and there have been many.

First, the problem is most corporate venture arms have merely played the role of
supplemental runway support for independent lead venture capital investors.
And thus in essence perpetuated the fragmentation, syndication and collusion
of risk in the arbitrage of innovation, quite the opposite of what is needed to
recognize the prime risk identified by outliers.

And since most venture capital firms in Silicon Valley have turned subprime
(99.4%[1] of them, as I explain ad nauseam on my site), corporate venture money
the way most corporations deploy it, is more good money after bad, and thus
does not really produce substantiative returns to a corporation nor moves the
monetary needle.

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2/12/2018 Is there an opportunity to help large companies establish corporate venture arms? What am I missing? How am I wrong? - Quora

Second, most corporations have established a beach-head around their core

competency quite resistant to change. And groundbreaking innovation of the
outlier kind (upstream) is bound to erode exactly the position of the corporation
it has so painstakingly preserved, with a new normalization of truth the
corporation will be unwilling to embrace. Most likely with a business model in
conflict with the walled-garden established by the cash-cow of the corporation.

If and even when the corporation demonstrates extreme incentives to reinvent

itself continually, which it should do to survive the test of time, the potential of a
discount at acquisition time does not make up for the ability to scoop up any
startup company on the open market without strings attached.
Related Questions

So rather than having a venture arm, it makes more sense for corporations to
Is 25 too late to start programming when people
develop a roadmap 1of emerging startup technologies it must acquire to reinvent from the new generation know how to do it since
Home Answer Notifications Search Quora Add Question
itself continually upstream and downstream, and merely snap up those they are 7-13 years old?

technologies to round out its own, rather than to participate in the regurgitation I'm 20. I'm incredibly bored during the day and in
need of money. What skill should I learn which
of subprime risk at the time of startup formation.
can land me a job in 3 months?

But I can see why corporations, faced with the dense fog created by venture What is your experience working with corporate
capital’s subprime deal appetite, may want to toy with their own deployment of venture arms?

prime. A reason why so many alternative startup funding strategies have If one were to start a corporate venture arm, what
would the incentive structure and performance
emerged as desperate bandaids to venture capital’s sub-priming. None will work
metrics look like?
that deploy merely a new (or even more diluted) distribution of the same
I’m 14 and I want to start a web design business.
subprime risk. I already have a website. How can I attract more
customers?
The key to finding an outlier of innovation - that knows no precedent - is the
I am a 20-year-old Senior Software Engineer at a
deliberate pursuit of prime risk. Not the avoidance of it. And as long as venture
large tech company, making 140k USD per year.
investors are not willing or able to pursue the foresight needed to deploy prime Am I an outlier?

risk from the beginning (alone if need be), I would suggest staying out of venture Am I wrong to think that programmers are
altogether. overpaid?

What are examples of Corporate Venture Capital

Footnotes (CVC) firms worldwide?
[1] Why 99.4% of venture capital firms fail
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