A corporation can use one tool or another or all of them, depending on the results that it wishes to obtain, which can go well beyond the financial returns that Corporate Venturing Capital has traditionally represented. New models of cooperation include taking action to acquire or source innovation with a strategic, long-term mindset.
It is important to highlight, to avoid confusions, that Corporate Venturing Capital (CVC), probably the oldest and most broadly used Corporate Venturing tool, is just one of the many tools available today. CVC is one particular way of engaging with startups, while Corporate Venturing as a concept covers all the tools. Corporations can use them depending on their situation, strategy, or even the speed of innovation of the industry in which they operate.
Once a firm has decided to pursue a venture strategy with a clear goal, in the authors’ experience, it faces difficulties identifying the appropriate startups with which to collaborate. Traditionally, knowledge pools such as universities and technology centres have been presented as the places to go for innovation. Although this still holds true, especially for the ideation phase of innovation, a better understanding of the entrepreneurial process has pushed the development of intermediate mechanisms that better support the development of innovative ideas from technology to business opportunities.
Moreover, the affordability of technology in terms of cost, the increased number of skilled people – both those with a mastery of technology and those with entrepreneurial skills – and the speed at which new ideas are spread have resulted in a geographic dispersal of the talent pool from which to source disruptive solutions that might serve corporate needs.
As a result of this diversity and geographic effervescence, new ways of engaging with startups have emerged. Besides internal resources, such as a firm’s connections with the startup ecosystem, its own internal venturing program and many other factors, companies can also leverage external resources through partnerships with other organisations such as accelerators, venture builders, other corporations or even public institutions with a joint program.
It can be an interesting entry method to the world of corporate venture for firms that lack knowledge of startups or experience in dealing with them. Joining existing corporate venturing units or dedicated external organisations that have expertise in the field can save a company time and resources compared to doing things on its own. The programs available have expanded rapidly in the past few years as the interaction between corporations and startups has intensified like never before as they have become more aware of the powerful incentives.
Today corporate venturing offers a wide range of tools for corporations to come up with disruptive innovations and adapt to the different needs of their innovation strategies:
Each one follows a diverse route to achieve different objectives – from purely direct or indirect financial investments to strategic alliances or support to develop products or services with or without equity investment, including tools such as challenge prizes. We know the question is not whether to capture innovation but how. The programs that the authors explore include traditional tools as well as the latest cutting-edge tools. The new tools have been devised with the same goal as their predecessors but they have taken centre stage in some corporations’ innovation strategy because of their ambitious approach or features.