If you haven’t heard of Corporate Venture Capital Funds (CVCs), then you’re not alone. CVCs are used by large companies to invest in startups for financial gain, but more importantly, corporations use CVCs to have access to innovation relevant to their businesses.
Most people are unaware of CVCs because they are relatively rare – typically existing in the rarefied space occupied by corporate behemoths. I’m here to argue that every company, big or small, should consider building a CVC. Here’s why.
Access to Innovation: This one is obvious. While large firms are constantly trying to innovate, CEOs of smaller companies ignore anything outside their primary businesses. I know – I was one of those CEOs. Investing through a CVC helps in identifying and nurturing ideas that may be applicable to one’s business five years in the future or even later. That could be the difference between success and an untimely demise.
Speed to Market: As a VC, I approached the CTO of a large retailer and asked about their approach to innovation. He told me that he had it covered: they were currently working on introducing robots in their warehouses. Now, I know this retailer well: my firm from a previous life had worked on a three year project to increase the maximum number of stores that could be handled by their systems. The project was celebrated as a success – but it had taken three years to complete. So how long do you estimate till they have robots in their warehouses? Amazon did it differently: used their CVC to invest in Kiva and implemented state-of-the-art robots in their warehouse in a matter of months.
Diversification: This is a big one and often underestimated for value. A CVC allows a company to invest in multiple projects at a significantly lower cost than handling them in-house. So even if a few ideas go sideways, there is enough there to add lasting value.
If you are a CEO that is thinking about innovation as you should, consider CVCs as a nimble and low-cost way to achieve your objectives.
Silicon Road is working right now with retail and e-commerce firms to help them with their venture investments. Contact us if you are interested in learning more.