The Benefits of Corporate
Venture Capital (CVC)
The ascendance of the venture capital model has radically changed the way that new technologies and business models move from inventor’s cerebral cortex to consumers hand.
This shift creates unique problems for the managers of large enterprises. In an age in which a radical new innovation to go from commanding a pricing premium to becoming a commodity item in months rather than years, having access to a steady flow of new capabilities – and a good way of deciding whether a given innovation can and should be proprietary – is increasingly critical.
And the numbers bear this out: over 64% of new technology sourcing is from
external sources:
Open Innovation teaches us that value networks must extend beyond the walls of the enterprise in order to stay relevant And the increasing appeal of entrepreneurship as a career path means that, more and more, the richest veins of those value networks include early-stage companies. Simply put, any firm for which access to technology is a critical component of the value proposition must have the ability to consistently attract entrepreneurial innovators.
Corporate Venture Capital is a powerful way for established companies to partner with the early-stage firms that drive change in the marketplace. By both investing in and partnering with early-stage companies, established firms become critical allies in an entrepreneur's mission to introduce a new product or service. Properly executed, CVC can be an important tool to learn about new markets, add functionality to existing products, arbitrage technology from one application or marketplace to another, and hedge against unanticipated developments in fast-moving markets.
The potential of CVC is clear: when comparing the total shareholder returns of the most innovative companies with those of their industry peers over a five-year period, Boston Consulting Group found that the shares of innovative firms outperformed their peers by nearly 400 basis points (4%) year over year
Synchrony Venture Management’s Innovation Capitalsm [link] platform is the surest way to add corporate venture capital to your firm’s portfolio of strategic capabilities.