Managed Innovation Capital Program

The increasing level of professionalism which has developed in the practice of Corporate Venture Capital (CVC) in recent years has created a tremendous opportunity for large firms to broaden and deepen their portfolio of competitive advantage-conferring capabilities. This can be seen in the both the quantity and quality of CVC activity in the marketplace.

As the discipline has developed, rising standards have raised the bar significantly with respect to expectations, performance, and the demands of internal stakeholders, venture capital co-investors and entrepreneurial partners. While it may once have been sufficient for CVC players to be relatively passive participants in the innovation ecosystem – and there are some VCs who were, and still are, perfectly happy to have them be 'dumb money' – that is no longer the case. Corporations which want to succeed realize that they need to step up their game.

One of the more frequent observations offered by C-level executives mulling CVC is the contrast between many of the skills necessary to field a successful practice and what they work to develop in the company’s executives. This is certainly true; as Clayton Christensen has made abundantly clear in ‘The Innovator’s Dilemma’ and other works, the better a firm is at the core competency of continually increasing revenue and profitability the worse it is at leveraging the kind of innovation at which entrepreneurial firms excel – and that in order to do that, managers must sacrifice the kinds of short-term goals which gain recognition and spur advancement.

This creates a dilemma. In order for CVC executives to excel, they must deliberately detach themselves from the fabric of their native management culture, risking internal influence and future career advancement. This paradox lies at the root of the challenge to create an effective CVC practice.

One effective solution to this paradox is to partner with Synchrony on a single-LP fund managed using Innovation Capital™ tools and processes.

An Innovation Capital™ fund is a focused, long-term partnership between Synchrony and our corporate partner which captures the complementary skills, resources and perspectives of each. It is managed jointly, with Synchrony handling the market-facing elements of the CVC practice and the client-side team focusing on fostering internal relationships and partnerships with portfolio companies.

Because the primary locus of activity is outside of the walls of the enterprise, an IC fund is buffered from many of the conflicts which have historically dogged CVC.  This greater operating latitude frees it to better engage with the innovation ecosystem on advantageous terms. It also allows for governance, terms of engagement, and compensation models which are more organically consonant with its mission.

Using the same methodologies which support our entire suite of services, an IC fund brings draws from the best practices of corporate management and venture capital.

 

 

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