In-House CVC

Various factors at the corporate and industry levels may drive the strategic decision of a company to invest in corporate venture capital (CVC) operations.

Companies often make tradeoffs while designing a CVC programme. These include organisational structure, compensation, investment strategy, interaction practices with business units, and so on. Unless these decisions are consistent for all areas of the CVC programme, CVCs will face immense obstacles towards success and long-term survival.

Azione works with companies to define the goals and investment focus of their CVC activities, along with an analysis of corporate culture, history of entrepreneurial activity, and level of support for CVC activities from their leadership. At the corporate level, the financial performances, the capacity to rapidly innovate, and the size of corporate patent stock might have an impact on the performance of the CVC unit.

This then leads to a choice of the organisational structure, a closely aligned compensation structure, and performance metrics for the CVC programme. Whether the benefits are financial (for example, through exit events such as IPOs and trade sales of portfolio companies), strategic, or a combination of the two, Azione helps define the returns and set up appropriate procedures to measure them.

Depending on the investment strategy, Azione works with CVCs on strategically focused programmes where the R&D business units play a key role in the due diligence process and for fully financially focused CVCs where access to cheaper capital and company networks would be more beneficial.

Companies also have to decide on their hiring practices – particularly whether they should consider the hiring of professional VCs. The transferability of the venture capital model to the corporate context depends on the overall objectives for a range of stakeholders. Notably, institutional objectives and constraints for a CVC unit are often different for those of venture capital firms.