In my experience, particularly for earlier stage startups (+/- Series A), such a major anchor-client is very important for future development. In practice, I have seen “land & expand models” work very well in larger organizations: landing a contract in one part of the CVC's corporation (e.g. (a) The direct contribution is rather obvious, turning most corporates into a paying client of the startup. There are two ways CVCs can contribute clients & revenues to the startup, in (a) a direct and (b) an indirect way: With stronger focus also on profitability, the own CVC's corporate and its network become an even greater enabler for startups' access to potential clients and revenues. However, CVCs can differentiate themselves and add further value by giving access to further clients and/ or revenue opportunities. Of course, capital is a crucial ingredient, in particular in times like these when the tide is turning and the extension of runway is critical. Value-added Corporate Venture Capital adds a very important ingredient beside capital. The name for most startups is no longer growth alone, its profitability and growth. See below as well Sizable capital available for investments as advantage) As many CVCs are investing from their balance sheet, it is often more a pre-alignment than actually having reserves in your fund. (iii) Keep capital reserves for at least one follow-on round. (ii) Consider who from the corporation is the best fit for joining the startup's Board (see here my recent article on Selecting right Board representative (see here as well my previous article on Selecting Board member). However, I would argue to include the “signal to market” into your assessment of your follow-on decision as a strategic investor, in addition to financial arguments to double-down on your winners. I am aware that CVCs/ investors cannot always follow-on even if the investment is strategically and financially on track. It demonstrates a strong signal to the market and further demonstrates stability in the investor base. While there are often good (or not so good) reasons why not to join the follow-on round, from my perspective it is particularly important to join the round following your initial investment. (i) Having pre-emptive rights to join the next round is a right but also a responsibility. To be a stable CVC investor, a few homework points: It is a very valuable and healthy perspective in Board discussions, hearing pain-points of clients and product opportunities in addition to the pure investor perspective. I observe the CVC taking the mid/longterm “client” role in Board discussions (voting or non-voting). Moreover, the CVC can provide additional advice and perspective to the startup strategy. This provides a startup a more diversified investor base and stability. CVCs are often measured not purely on financial return of the investment, but also on strategic KPIs (such as the number of product deployments, impact/return from using the product and the number of cross-selling opportunities). to build out the startup's product roadmap or extend the runway in challenging times. I have experienced several cases, where in particular CVCs added fresh capital e.g. Especially during challenging times, having an investor dedicated to the product can add stability. This increased emphasis on the product results in better-aligned interests for the startup. By being a client of the startup, the CVC's attention to the actual product is crucial for the startup's development and the CVC's role. The primary focus of CVC is centered on the growth and profitability of the startup, as well as its product offerings. (6) Sizable capital available for investments as advantageĬorporate venture capital (CVC) typically maintains both strategic and financial focus. (2) Shift to focus on growth & profitability combined In my view, it's the perfect time for CVC.Īs such I am sharing an update on an article I posted last year with 6 reasons, why I believe value-added CVC will increase plus I re-added again some “CVC homework” to achieve such growth: the SVB collapse, the overall market turmoil in light of increased interest rate environment and valuation softening, I receive often the question what this means to #corporateventurecapital.
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