Best Practices for Corporate Venture Capital

 Over the decades, corporate venture capital (CVC) has been recognized by its boom-and-bust cycles. It is on a high again and in its fifth cycle. Most companies incorporate their CVC team when investing is high, pumped by their need to innovate and fear of losing on unruly new business models within their approach.

Modern, corporate venturing is taking a new big leap. Corporates are still collecting good returns, but as digitalization transforms industries across the world, industry leaders are using fund management software, venture capital software tools, and investment accounting software to get access and leverage high-end technologies to accelerate innovation. Therefore, corporate venturing is growing to become a well-established corporate development practice, especially the one to be continually growing and gaining funds alongside research & development and M&A.

But why is it still so challenging to get it right? What are some best practices for successful corporate venture capital? So, let’s dive into the 7 best practices for corporate venture capital.

1. Set a Clear Objective

To begin, an organization must decide whether the primary goal of its CVC unit is financial or strategic. This decision will guide the optimal organizational structure, incentive scheme, and people as well.

Research & development

Use Fund Management Software to watch trends and learn adjacent markets

Driver the M&A Funnel

2. Define Your Search Field

A corporation must decide where its CVC unit will get potential investments. Though it’s time-consuming and tough. That’s where the search fields come into play to safeguard the CVC unit to ensure that the prospective investments are relevant to the business, which results in supporting senior managers.

3. Pick a Leader from Outside

If you are new in the corporate venture capital, you better tap on professional shoulders to lead your CVC. You need to find someone with the right skill set, network, and expertise in next-Gen technology such as venture capital software tools and investment accounting software.

4. Hire the Right Talent

One of the best practices for corporate venture capital is to hire the right team from outside or inside. However, internal resources (Team) can create a gap between the CVC unit and the company’s business to provide excellent working relationships. Whereas the external talent can provide access to a wider network along with contributing valuation and contract expertise.

5. Guaranteed Independence

It is vital for the CVC unit to ensure a position, which is separate physically & operationally from the company’s day-to-day operations and provides the unit with extra space for innovative and creative activities. It will streamline the entire investing process.

6. Easy Collaboration With Business Units

A CVC unit requires autonomy, but it also depends on the company’s proficiency and other resources, and this is the best thing that every company should be encouraged to do. And companies should make sure that the unit should not be jumped off the company.

7. Allow lean, agile, and relevant governance

It is essential for the companies to enable lean, agile decision-making in the process to provide a suitable environment for CVC units to pace with the startups. And companies can ensure support and engagement from senior managers in the company by seeking advice from the key stakeholders in decision making.

So, none of the aforementioned CVC practices indicate the direction of a typical CVC unit. The simplest reason for this is the practices above are mostly based on proven market strategies shared by market experts.

But what if a corporation looks forward to setting up its own internal unit? Based on our market analysis, the best approach is to invest beyond the balance sheets, prepare for more risks than a typical fund, invest in fund management software, venture capital software tools, investment accounting software along with multiple genes, and a large team for technical support. It’s better to focus on co-investments instead of adhering to VC market standards. Venture capitals are driven by returns and they cannot follow the above practices but a corporate can do.

If your ultimate goal is research then learning, analyzing, boosting revenue and M&A makes more sense. The corporate venture capital can also try to leverage the current client base to the edge and introduce more options or stretch against a typical venture capital fund. This is not what the responsible business manager looks for as the assignment and the need to establish a corporate venture capital and claim a place in the corporate world can be real, but this is a useful corporate venture capital practice based on industry sayings paving a shortcut to better results.