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IT’S HARDLY SURPRISING that big companies are attracted to the venture capital (VC) model for new business development. Its track record is enviable: the industry as a whole outperformed the S&P 500 in five of the past six years, and US venture-backed companies have raised more than $40 billion in initial public oƒferings since 1990. Moreover, the model tempts management with the prospect of improved access to business innovation, better retention of entrepreneurial talent, and greater growth in demand for core products.
Yet more oƒten than not, big company attempts at applying the VC model produce disappointing results. Most find it diƒficult to establish the systems, capabilities, and cultures that make good VC firms successful. Even so, big companies can apply the VC model successfully with the right approach and expectations.