To stay ahead of competition, to continually develop their innovativeness, and to deliver superior value to stakeholders, many established companies have reconsidered the way they search for new business opportunities and the way they explore and develop new external capabilities by opening their innovation process through corporate venture capital (CVC), venturing alliances, acquisitions, licensing, joint development, and so on.
Many companies have been slashing internal long-term R&D spending and investments in venture capital-backed start-up companies. To turn this situation around, they must re-invest aggressively in venture capital and rely a lot more on leading-edge start-ups for outside R&D.
As preparation for CVC development, Azione provides strategic advice with respect to:
- Market research in target markets
- Evaluation and positioning of companies in the market, including assessment of the competitive landscape and benchmarking against CVC competitors
- Economic and financial evaluation of the fund structure, optimal fund size, and appropriate terms and conditions that reflect market trends
Companies may have an access to breakthrough or complementary knowledge through their CVC investments. CVC activities may reside at various corporate levels, and the investments are made directly in start-up companies or through independent venture capital funds as limited partners.
The optimal organisational structure depends on the goals. For companies emphasising capital gain, CVC operations can be most successful when allied with venture capital firms. By partnering with the appropriate venture capital firms, companies can use their operations to introduce new technologies into their organisations.
For companies where strategic objectives are more important than capital gain, the distance between the CVC and its parent company is a consideration. While the CVC unit must be close to the parent company to achieve its goals, it should also be autonomous for the unit to create new businesses that do not exist in the parent company.