Innovation Capital™

The Innovation Capital™ system is Synchrony’s proprietary method for quantifying the strategic value of a client’s corporate venture capital program. It encompasses a set of tools, processes and techniques which engage enterprise stakeholders in the process of determining where and how innovation can advance a firm’s financial and strategic goals, and allows Corporate Venture Capital (CVC) managers to efficiently screen thousands of investment opportunities to select only the ones which are worth pursuing.

Synchrony’s Innovation Capital™ system allows our clients to:

  • Determine which technology and business areas within the firm have the most potential for benefit through strategic investment
  • Establish a concise set of metrics describing where within the enterprise innovation confers benefit
  • Target external sources of dealflow relative to those areas
  • Concisely articulate potential strategic gains, and screening dealflow relative to those gains
  • Engage internal stakeholders and communicate strategic deal drivers to them 'by the numbers'
  • Establish specific value-creation thresholds for deals/partnerships
  • Track performance over time
  • Simply and succinctly report their contributions to senior management
  • Capture ‘institutional memory’ for longitudinal comparison of opportunity sets over time
  • View the relationship between strategic needs and investment opportunities graphically

Innovation capital chart

Synchrony’s Innovation Capital™ system is built around a customizable framework which compares a wide range of disparate innovation opportunities to one another regardless of their native performance measures. It can be executed in several different modes: as a one-time implementation as part of designing a CVC program, as an ongoing process, or as part of a long-term partnership to manage a fund.

The system efficiently encompasses:

  • Financial variables (i.e. increased revenue, improved margins, cost savings)
  • Key Performance Indicators (i.e. efficiency increase, time-to-market decrease, establishment of a competitive barrier, product differentiators)
  • Difficult-to-measure intangible benefits (technological influence, learnings, know-how, market-signaling)

These elements are combined into a simple, two-part expression, the first describing expected financial impact, the second strategic. An example of the expression would be:

$580MM | 687

Where $580MM is the total expected value of the investment and partnership over time, and 687 measures its strategic benefit.

We call this expression ‘Total Innovation Capital Returns,’ and abbreviate it as ‘TiCR’.

Because the expression contains two components, it can be plotted on an x/y scatter chart (Figure 1). CVC managers can use this chart to easily visualize the mix of strategic and financial return in any deal or collection of deals.

Synchrony White Paper

whitepaperOur latest White Paper: Innovation Capital™: An Empirical Framework for Screening, Selecting & Measuring Strategic Investments, is now available.

The recent global focus on the importance of innovation has once again placed corporate venture capital (CVC) in the spotlight. With a burst of new programs and the recommitment of long-time players, CVC is certainly back - but with significant differences than in its earlier incarnations.

Read the whole story by downloading our whitepaper today.