Insights about Corporate Venturing Capital and Innovation from a business model perspective

1. Insights about Corporate
Venture Capital and
Innovation from a business
model perspective
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2. 2
what is corporate venturing?
The way corporations innovate is
changing. Conscious that startup
companies are changing their market
rules and creating new ones,
corporations are trying to capture the
maximum value by taking equity of
these new companies.
Corporate Venture Capital (CVC) is a practice where a
large firm takes an equity share in a small but innovative or
specialist firm, to which it may also provide management
and marketing expertise; the objective is to gain a
specific competitive advantage
CVC is an activity into the Open Innovation paradigm that
helps big companies (slow, bureaucratic, worried about its
brand…) to invest in new ideas that are agile, quick and
light brands.
Typically, investment belongs to financial departments but
CVC has a risky model (and high performance), so
strategic approach needs to be taken because
This paper will discuss what is the business model of CVC
and how startups should deal with when asking for
investment.
introduction
Managing a diversified portfolio of startup
investments is a way of disruptive innovation

3. 3
what means investing in startups?
Investing is a consequence of a
foresight that a company value will
increase. Investing is related to
returns in advance.
A startup needs investment to grow
but also to achieve the next key
milestones in its plan to success.
introduction
Initial value
Final value
Added value
How the CVC helps to
increase the value of a
startup is not about the
amount of money, but
“smart money”
Investment
must be less
than the added
value to have a
profit
High risks lead to manage a portfolio of investments, not a
one and only bet because about 85% of a portfolio ventures
fail.

4. 4
CVC business model canvas
Source: Placeholder example
how it works
Value
Proposition
High
profitability
business
project
generation
Customer Relationship Customer
Segments
Key
Partners
Channels
Cost Structure Revenue Streams
Key Resources
Key Activities
Venture
Capital
and other
co-
investmen
t vehicles
Start-up
Value
generation
partners
Shares in startups with
access to Admin Comitee
Value Generation Asset
Startup Call and Selection
Maturation (value growing)
Exploitation
Call and selection costs
Access to investor fund network
Value generation process
Profitability Track record and
operations history
Co-investments
Investor and Fund Networks
Investment Brokers and Banks
Venture Capital (next
stage)
Other market players
(Clients)
Corporate and
Providers
Exits: by selling startup share
Dividends (from startup) and Other (indirect sales)
Spin-in (startup integration)

5. 5
creating value for the next investors
Actually, a CVC must sell its shares to
customers that strongly believe they are
doing also a good investment
Natural investors are next stage VCs, that will take the
company to another level, if needed (ie. scale-up,
growth…).
Also, some CVCs transfer participated startups to clients or
even these startups become clients for the CVC’s
corporation. So, it’s a good instrument to generate new
clients and stimulate new markets.
If the startup is integrated into the CVC’s corporation, a
direct income is not mandatory but interesting in order to
align the CVC objectives to the innovation vision. Then,
investment is done only in strategic startups, not looking
only for a short term revenue.
Customer relationship (how they get, keep and grow
customers) in a CVC business model is based on:
 Successful operations carried out in the past
 Other investors that invest with the CVC
how it works
money fears uncertainty, so investment is
made in based on trust and expectation more
than ever

6. 6
delivering the value proposition
What makes different a CVC is the value generation for
the startup, how is its “smart money”.
CVCs are in competition to capture the best startup projects. Only a competitive
advantage (unique process and asset) will attract the right startups to the CVC.
Otherwise, startup and CVC are losing time and money.
Focus on this unique asset and process to deliver value.
 Maturation process is key. If it delivers value, the call for investments and
divestments are easy to achieve.
 Identification of unique assets is not obvious for CVCs because startup
necessities are quite different from corporation solutions, even the language.
 Startup projects may not appear in the region a CVC is searching in. Effective
communication and increase the call range is a challenge for some CVCs with
special project requirements.
how it works
CVCs are offering new
formulas “as equity” like
brand, client access,
notoriety, technology,
labs, money... as long as
the metrics of the value
they provide are clear

7. 7
CVC goal definition
how it works
Customer Segment Goal Vision Characteristics
VC (next stage) Financial Short-term returns
High growing projects – This is the reason for the
attractiveness of digital and ICT based projects versus
industrial projects.
Other market players and clients Financial / Strategic Mid-term returns
Create potential new customers of the corporation
Projects are slightly aligned with innovation strategy
Corporation and Providers Strategic Long-term returns
Innovation is incorporated through a new provider or
existing one or directly absorbed by the corporation R&D
It helps to explore new businesses

8. 8
modeling a CVC fund
While CVC has doubled the number
in 5 years, only few CVCs know
exactly the value they add to
participated startups.
Most of them offer
generalities and activities
they haven’t proved yet
to be valid and generate
value.
how it works
Relevant Investments
ResultsPortfolioand Average
Ticket
Unique Assets
Project profiles
Value Generation
Asset
Process for adding
value and metrics to
verify
Project Maturity (Stage)
Technology
Market
% of share
Current operations
Known companies the
CVC invested in the
past
Profitability multiplier
Current Size in projects
Average Ticket
Minimum Ticket
Fund
Size in money and
current investment
Co-investment
Current invest
Successful divest
Successful spin-in
Failures
Strategy Capacity
Some metrics that matter when comparing CVC funds.

9. 9
conclusions
Adding and growing the
startup value is the key
Measuring the effectiveness
of the maturation process is
still a challenge for most
CVCs
 Which asset does provide value
to startups?
 Where are the startups to be
accelerated with this asset?
 How to demonstrate the effect of
this is smart money?
what’s next
Asset and goals
A financial perspective lead to
exploit assets closely related to the
current corporation activity, So:
 If the asset utilization is in
decadency, it looks a good idea to
increase its profitability
 If it is only underexploited by
market conjuncture, it will surely
compete with the current
corporation’s activity in regular
conditions.
CVC and innovation
CVC must be quicker than corporate
innovation, but also, more
sustainable as a long-term
investment tool.
Innovation and Financial
might collaborateto
ensure a balance
between sustainability
(short-term results) and
innovation (long-term
results)

10. 10
do you want a disruptive business?
Miquel Angel Pérez holds a Telecommunication Master
Degree and MBA by the UPC (Spain). He has more than
15 years experience in Marketing for B2B industrial
markets and technology-based companies. Expert in
research and innovation networks of Spain, he has carried
out research about methodologies and systems for
innovation, with the aim to assure market uptake and
financial viability.
Miquel Angel adds his knowledge in new product, service
and business model conceptualization based on
exploitation of intangible assets for clients of The
Knowledge Agents Alliance and internally as well
Business Designer | Innovation Advisor
| Marketing Manager | #DesignInTech
about the author
@maperez1977
es.linkedin.com/in/miquelangelperez