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Success
Factors in
Corporate
Venturing
P02.




Key InsIghts   »Benefits of corporate venturing are
               diverse. Thus corporate venture capital
               units can pursue multiple goals
               simultaneously, as long as they are
               aligned to corporate needs, clearly
               communicated within the organisation      »Understanding internal and external
               and monitored on a long-term basis by     deal sources and innovation hot spots,
               a concisely defined metric set.           in terms of market and technologies,
                                                         constitutes an integral part of corporate
                                                         venturing activity.
               »Financial interests and innovation-
               related strategies are not mutually
               exclusive.                                »Assessment of investment opportuni-
                                                         ties has to be done in cooperation with
                                                         external partners and can be a time-
               »Corporate venturing units have to        critical issue in some industries.
               operate autonomously, but be deeply
               rooted in corporate innovation
               strategy and connected to business        »Processes integrating internal
               units to unfold their full potential.     and external parties, inspired by new
                                                         venturing approaches, have to be
                                                         established, either by collaboration
                                                         agreements or joint equity (syndication).




                                                                                                               Introduction
                                                                                                              Methodology
                                                                                                            Strategic Setup
                                                                                                        Investment Process
                                                                                                     Internal Collaboration
                                                                                                                Conclusion
                                                                                                                    Contact
P03.




IntroductIon                        The importance of corporations in
                                    venture capital (VC) has increased
                                                                                  120.000
                                                                                            Rather Financial Focus                                              Rather Strategic Focus
                                                                                                                                                                                                 30%

             Corporate venturing    continuously, especially with respect
                                                                                  100.000                                                                                                        25%
                 becomes a core     to the number of deals they are invol-
              tool in innovation    ved in.
                   management.                                                     80.000                                                                                                        20%
                    Defining and    At the same time corporate venturing
              measuring success     (CV) strategies shifted from financial         60.000                                                                                                        15%
               factors is the key   to more strategic objectives supporting
             performance driver.
                                    the innovation process.                        40.000                                                                                                        10%


                                    The shift had no impact on the amount          20.000                                                                                                        5%
                                    of funding, but can explain the incre-
                                    asing share of deals with corporate
                                                                                       0                                                                                                         0%
                                    venture capital (CVC) involvement, as
                                                                                            1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
                                    many innovation-related objectives are                                                                     Data: National Venture Capital Association 2011

                                    based on deal diversity rather than on
                                                                                                                                    Total VC Investment in $M (LHS)
                                    deal size.
                                                                                                                                    Total CVC Investment in $M (LHS)
                                                                                                                                    % of $ Coming from CVCs (RHS)
                                    Definition and measurement of suc-
                                                                                                                                    % of Deals with CVC Involvement (RHS)
                                    cess factors is the most critical factor in
75 0/0 of the underperformers       launching and running a successful CVC
      but only 22%0/0 of the        unit. This challenge intensifies as CVC
 top performers regard the          units shift their emphasis from purely
definition and measurement of       financial to innovation-related goals.
 success factors as a major         General developments, such as shorter
           challenge.               technology life cycles and the fragmen-
                                    tation of knowledge, further challen-
                                    ged traditional processes.                                                                                                                       Introduction
                                                                                                                                                                                     Methodology
                                                                                                                                                                                   Strategic Setup
                                                                                                                                                                               Investment Process
                                                                                                                                                                            Internal Collaboration
                                                                                                                                                                                       Conclusion
                                                                                                                                                                                           Contact
P04.




                                                                                ACTIVITy (Number of Portfolio Companies)
Methodology                   In this study performance is approxi-
                              mated by a function of continuity and
                                                                           50                                                      Positive Performance

                                                                                                                                   Negativ Performance
                                                                           45
        Financial returns     activity, since financial returns are fre-
     do not represent the     quently disclosed and do not represent       40
           entire strategic   the entire strategic value. It is assumed
                                                                           35
       value of corporate     that continuity of the CVC units in the                                                                                                                                                                                           & ICT
                                                                                                                                                                                                                                                        Media
     venturing activities.    market and the respective current level      30
         Performance can      of activity provides an approximation to     25
     only be approxima-       the strategic value added to the corpo-
        ted and has to be
                              ration. Firms would limit the venturing      20
                                                                                                                                                                                                      ICPS
      seen in an industry
                              activity in case of no value creation. To
                   context.                                                15
                              control for differences in industries, the
                              sample was segmented by investment           10
                              focus resulting in the two clusters (1)       5
                              Media & Information and Communica-                                                                                                                                                     CoNTINuITy (years of Experience)
                              tion Technology (ICT) and (2) Industry        0
                                                                                0                                            2            4               6           8            10            12           14             16           18            20
                              and Consumer Products and Services
                                                                                                                   Analysis based on global online survey (CVC units, n=19; VCs, n=98) and focus interviews (n=91) among managing directors of CVC and VC
                              (ICPS). The Media & ICT cluster is charac-                                                  units; Absolute performance represents the distance to the industry averages, divided by the industry specific standard deviation.

                              terized by a larger deviation of activity
                              and continuity and more venturing
                              experience. Top performers are located                                                                                   1. Media & ICT              2. Industry & Consumer Product Services (ICPS)
                                                                                                                                   Electronics, Media & Entertainment,             Chemicals, Business Products & Services, Consumer Products &
                              above the respective industry averages                                                       Telecommunications, Computer & Peripherals,             Services, Financial Services, Life Science & Healthcare, Supply Chain/
                              (trendlines), underperformer below.                                                                                Software & IT Services            Logistics, Energy & Renewables, Materials, Manufacturing



                              The data used originates from a
                              comprehensive online survey among
                              19 CVC units from 8 countries.
                              The questionnaire was based on a large
                              number of focus interviews among                                                                                                                                                                                       Introduction
                              CVC units and independent venture                                                                                                                                                                                     Methodology
                              capitalists (IVCs). In addition, an                                                                                                                                                                                 Strategic Setup
                              adapted version of the online survey                                                                                                                                                                            Investment Process
                              was conducted among almost 100 IVCs.                                                                                                                                                                         Internal Collaboration
                                                                                                                                                                                                                                                      Conclusion
                                                                                                                                                                                                                                                          Contact
P05.




Methodology                       Strategic Setup (1) is defined
                                  as the initial setup of strategy
                                                                                 HyPoTHESIzED SuCCESS FACToR By PRoCESS PHASES


            Three phases          and objectives and the respective                       1.                                2.                         3.
           constitute the         performance measurement. Further, re-               STraTegIC                        InveSTMenT                  InTernal
                                                                                        SeTuP                            ProCeSS                CollaboraTIon
               corporate          levant process capabilities, in particular
      venturing process:          process acceleration capabilities, have       Strategic orientation             deal Sourcing               relationship to bus
        (1) The Strategic         to be developed.
                   Setup,
     (2) The Investment           inveStment proceSS (2) related factors        financial orientation             external Collaboration      relationship to CP
             Process and                                                                                          (non equity partnering)
                                  range from deal generation to external
             (3) Internal
                                  relations and are regarded on a deal
          Collaboration.
                                  basis, but implemented parallel.
                                                                                Strategic ambiguity               Syndication                 long-Term Horizon
                                                                                                                  (joint equity partnering)


                                  Continuous internal collaboration
                                  (3) with the corporate parent (CP)and
                                  its business units (BUs) is a major point     Performance Measurement           venture Support
                                  of differentiation of CVC units from IVCs.

     SuCCESS FACToR IN CoRPoRATE VENTuRINg MoDEL
                                                                                Process Capabilities              exit Strategy
                     InTernal
                  CollaboraTIon

                   InveSTMenT
                     ProCeS                                                                                       external Communication


                    STraTegIC
                      SeTuP                                                      DIMENSIoNS oF ANALySIS



                                                                                      InduSTry                  effeCT on
                                                                                      SPeCIfICS               PerforManCe
                                                                                                                                                                        Introduction
                                                                                                                                                                       Methodology
                                                                                                                                                                     Strategic Setup
                                                                               The corporate venturing framework is based                                        Investment Process
                                                                               on a literature review and focus interviews.                                   Internal Collaboration
                                                                                                                                                                         Conclusion
                                                                                                                                                                             Contact
P06.




                                                                                                         STRATEgIC goALS By PERFoRMANCE TyPES...
strategIc                   Strategy
                            Contrary to conventional wisdom top                                                                 100%

    setup
                                                                                                      Technical Innovations                                                                     + 0%
                                                                                                                                100%
                            performers tend to follow a wider
                                                                                                                                89%
                            range of innovation-related strate-                                      Window on Technology
                                                                                                                                67%                                                         + 32%

  Defining innovation-      gies rather than focusing on one core                               Business Model Innovations
                                                                                                                                67%
                                                                                                                                                                             + 0%
                                                                                                                                67%
           related goals,   business line, while taking into account                                                            78%
                                                                                                          open New Markets                                                          + 77%
     without neglecting     the importance of financial benefits.                                                               44%
                                                                                                                                67%
    financial objectives    The dual focus on financial and strategic                                      Financial Interest
                                                                                                                                44%
                                                                                                                                                                             + 52%

 is a core performance      objectives of top performer showcases                                                               44%
                                                                                                                                                              + 16%
                                                                                   Improve Corporate Image on Innovation        38%
   driver. Performance      on the one hand the multiple benefits                                                               44%
  measurement should                                                                                Ecosystem Development                                     + 100%
                            of corporate venturing in the manage-                                                               22%
      be based on either                                                                                                        22%
                                                                                                                                                      - 33%
                            ment of innovation, on the other hand                  Control for Potential Future Competition     33%
         a qualitative or
                            the need of financial return to legitimate   Make use of Non-Streategic Intellectual Property
                                                                                                                                33%
                                                                                                                                                      + 154%
    quantitative metric                                                                                                         13%
                            the venturing activities in the long run.                                                           33%
                     set.                                                             Promote Corporate Entrepreneurship                              + 154%
                                                                                                                                13%
                                                                                                                                11%
                            performance meaSurement                                          Improve Consumer orientation
                                                                                                                                25%
                                                                                                                                               - 33%

                            Top performers measure the impact of                         Attract and Retain High Potentials     11%
                                                                                                                                         + 100%
                            their corporate venturing activities by a
                            clear set of either qualitative or quanti-                                                              Top Performer
                            tative Key Performance Indicators (KPIs)                                                                underperformer
                            with a long-term horizon.
                                                                                              STRATEgIC PLANNINg oN KPIS        QuALITATIVE VS. QuANTITATIVE KPIS

                                                                                     44%                       57%                     56%                             44%            Top Performer
                                                                             14%            43%                 43%              22%     22%                     56%                  underperformer
                                                                                               Short-Term (<6 Month)                    Quantitative
                                                                                           Medium-Term (6-24 Month)                     Qualitative
                                                                                              Long-Term (>24 Month)                     Dual

                                                                                                                                                                                  Introduction
                                                                                                                                                                                 Methodology
                                                                                                                                                                              strategic setup
                                                                                                                                                                           Investment Process
                                                                                                                                                                        Internal Collaboration
                                                                                                                                                                                   Conclusion
                                                                                                                                                                                       Contact
P07.




      strategIc                      Strategy & performance
                                     meaSurement                                                        MedIa & ICT
                                                                                                                      STRATEgIC goALS By PERFoRMANCE TyPES...

                                                                                                                                                                  ICPS
          setup                      Accessing technological innovations
                                     is the major focus of all CVC units.
                                                                                 + 0%
                                                                                                               100%
                                                                                                               100%
                                                                                                                                Technical Innovations             100%
                                                                                                                                                                  100%
                                                                                                                                                                                                  + 0%

                                                                                                               100%            Window on Technology               80%
                         Industry    This underlines the role of CVC in the      + 33%
                                                                                                                75%                                               60%
                                                                                                                                                                                               + 33%

              background shapes      management of innovations.                          - 50%                  50%
                                                                                                                             Business Model Innovations
                                                                                                                                                                  80%                     + 33%
                                                                                                                75%                                               60%
                  strategic setup.   Creating a ‘window on technology’ is                                       75%                                               80%
                                                                                     + 200%                                      open New Markets                                        + 33%
             Process acceleration    generally considered important, but is                                     25%                                               60%
                                                                                                                75%                                               80%
                  capabilities are   more relevant in the Media & ICT cluster,      +50%                        50%
                                                                                                                                  Financial Interest
                                                                                                                                                                  60%                    +33%
               primarily relevant    due to shorter technology life cycles.                                                                                       60%
                                                                                            -100%                      Improve Corporate Image on Innovation                         + 50%
                    in the Media     In the ICPS cluster top performers show
                                                                                                               50%                                                40%
                                                                                                               50%                                                20%
                 and ICT cluster.                                                           + 100%                            Ecosystem Development                         + 100%
                                     a stronger focus on ‚soft‘ objectives                                     25%
                                                                                                               25%                                                40%
                                     related to image, culture and human                    - 100%             50%
                                                                                                                       Control for Potential Future Competition
                                                                                                                                                                  20%
                                                                                                                                                                                + 100%

                                     resources.                                                      + 100%
                                                                                                               25%             Make use of Non-Streategic         20%
                                                                                                                                                                         + 0%
                                                                                                                                 Intellectual Property            20%
                                                                                                               25%                                                40%
                                                                                                     + 100%              Promote Corporate Entrepreneurship                 + 60%
                                     Quantitative performance indicators                                                                                          25%
                                                                                                               25%                                                60%
                                     are more common in the Media & ICT                                + 0%
                                                                                                               25%
                                                                                                                           Improve Consumer orientation
                                                                                                                                                                  50%
                                                                                                                                                                                      + 50%

                                     cluster, which can be explained by                     - 100%                        Attract and Retain High Potentials      60%
                                                                                                                                                                                      + 200%
                                                                                                               50%                                                20%
                                     their greater emphasis on financial
                                     objectives and their generally larger                                                                                           Top Performer
                                     experience in venturing.                                                                                                        underperformer


   10 0/0 of the CVC units in        proceSS capabilitieS
the ICPS cluster regard their        In the Media & ICT cluster process
 processes as fast compared          capabilities, in particular investment
   to 63 0/0 in the Media and        speed but also process flexibility, are
           ICT cluster               considered to be more relevant and                                           media
                                     should be part of the strategic setup.                                       and ict
                                                                                                                                                                                          Introduction
                                                                                                              icps                                                                       Methodology
                                                                                                                                                                                      strategic setup
                                                                                                                                                                                   Investment Process
                                                                                                                                                                                Internal Collaboration
                                                                                                                                                                                           Conclusion
                                                                                                                                                                                               Contact
P08.




       InvestMent                                       Deal Sourcing
                                                        Even though proactive and structured
          process                                       deal sourcing is broadly acknowledged,
                                                        not all CVC units seem to have long-
                              Top performers,           term-oriented processes in this regard.                               venturIng trends
                                especially in           Deals are primarily sourced through                                   New venturing approaches will rethink traditional
                             ICPS cluster, do           the personal network, whereas top                                     deal sourcing, external collaboration and venture
                          recognize the need            performers concentrate further on deal                                support models.
                        for a systemized ap-            sourcing via syndication partners.
                        proach in deal sour-                                                                                  Top performers have a much     CVC units show a very po-
                           cing and defining                                                                                  stronger ambition to open-     sitive attitude towards more
                                                        This network dominated deal source                                    up their processes by incor-   external collaboration and
                         relevant technology
                                                        structure suggests an opportunistic                                   porating open innovation       communication, especially
                         and market targets.
                                                        behavior, which explains the barely                                   elements in their venturing    in the Media & ICT sector,
                                                        long-term oriented approaches in deal                                 approaches than underper-      nevertheless CVC units are
                                                        sourcing. The ICPS cluster shows the                                  formers. They appreciate       less open than VCs. The
                                                                                                                              approaches related to sour-    progressive attitude in the
                                                        strongest interest in this issue, which
                                                                                                                              cing and nurturing seed        Media & ICT sector and
                                                        can be explained by their limited expe-                               and early stage ventures       of IVCs indicates that an
                                                        rience in corporate venturing and the                                 and mainly value benefits      established venturing cul-
                                                        fast development of technologies in                                   such as networking with        ture has a positive effect on
                                                        many sub-segments.                                                    entrepreneurs and global       openness.
                                                                                                                              sourcing of new ideas.

     % oF CVC uNITS HAVINg LoNg-TERM (>24MoNTH)         % oF CVC uNITS uNDERLININg THE CHALLENgE
                           PLANNINg APPRoACH IN         oF SouRCINg


                                                  78%    56%
Industry/Market Focus + 16%                                                  + 124% Sourcing of investment oppurtunities
                                                  67%    25%

                                                  56%    56%
         Technology Focus -16%                                              + 124% Indentification and definition of target
                                                  67%    25%
                                                                                   industries, markets and technology
                                                  22%
                              Deal Sources + 0%
                                                  22%
                                                                                                                                                                                 Introduction
                                                                                                                                                                                Methodology
                                                            Top Performer                                                                                                     Strategic Setup
                                                            underperformer                                                                                              Investment process
                                                                                                                                                                       Internal Collaboration
                                                                                                                                                                                  Conclusion
                                                                                                                                                                                      Contact
P09.




             InvestMent                                   external collaboration
                                                          Only a minority of CVC units involve a
                                                                                                                             SynDication
                                                                                                                             Joint investments are an attribute of
                                                                                                                                                                         Top performers
                                                                                                                                                                         strongly syndicate

                process                                   broad range of external partners on
                                                          a continuous basis in their processes;
                                                                                                                             top performing CVC units, showing that
                                                                                                                             those CVC units have realized the value
                                                                                                                                                                         with other investors
                                                                                                                                                                         – in particular with
                          Investment decisions            consequently only few do long-term                                 added by diversified corporate venture      other corporations.
                              are supported by            planning in this regard. However, top                              support and deal evaluation. Further
                              external partners
                                                          performers involve selected external                               perceived key benefits are deal referrals
                                  such as other
                                                          partners such as CVC units, IVCs, tech-                            from co-investors and mitigation of risk.
                            investors, industry                                                                                                                          % oF CVC uNITS uNDERLININg THE CHALLENgE oF...
                                                          nology and industry specialist, busi-                              Compared to their independent coun-
                              experts, research
                               institutions and           ness angels, consumers and lawyers                                 terparts, CVC units focus slightly more      67%
                                                                                                                                                                                              + 415% Finding adequate co-investors
                                                                                                                                                                          13%
                                     consumers.           in their investment decision. Further,                             on joint investments with ICVs and other
                                                          top performing CVC units, like IVCs ,                              corporate investors. However, CVC units
                                                          have a much more positive perception                               take more than two times less often
                                                          of benefits in external collaboration.                             the lead in investments, which can be
                                                                                                                                                                         SyNDICATIoN BEHAVIoR By PERFoRMANCE TyPES...
                                                          Potential of universities, incubators and                          explained by their historical follower
                                                          consumers remains largely untapped.                                position.                                    89%                       + 33% Syndicate
                                                          Beside trust, the integration of external                                                                       67%

                                                          knowledge is perceived the biggest                                                                              78%                     + 136% Syndicate with
                                                                                                                                                                          33%                            other corporations
                                                          challenge, in particular by top perfor-
                                                                                                                                                                          44%        + 100% Lead Investor
                                                          mers. External collaboration is strongest                                                                       22%
                                                          and considered most relevant in the
                                                          Media & ICT cluster.                                                                                               Top Performer
                                                                                                                                                                             underperformer
       LEVEL oF oVERALL ExTERNAL PARTNER INVoLVEMENT...

 Top Performer   33%            56%               11%              50%                     40%          10% ICPS
underperformer   33%           44%               22%      13%               63%                     25%        Media & ICT

                                          High                      High
                                        Medium                      Medium
                                           Low                      Low                                                                                                                                               Introduction
                                                                                                                                                                                                                     Methodology
                                                          overall external partner involvement construct ist based                                                                                                 Strategic Setup
                                                          on continuity and diversity
                                                                                                                                                                                                             Investment process
                                                                                                                                                                                                            Internal Collaboration
                                                                                                                                                                                                                       Conclusion
                                                                                                                                                                                                                           Contact
P10.




                 InvestMent                                       venture Support
                                                                  The industry context plays a major
                                                                                                              external communication
                                                                                                              Despite the general interest in
                                                                                                                                                                   In line with their
                                                                                                                                                                   deal sourcing

                    process                                       role in the type of support provided.
                                                                  Marketing and human resources
                                                                                                              increasing visibility, top performers
                                                                                                              communicate investment deals and
                                                                                                                                                                   behavior, top
                                                                                                                                                                   performers use
                                        Intensive support         support is for example much more            networking relevant information,                     communication
                                            does not limit        relevant in ICPS cluster, as these issues   rather than corporate and CVC unit                   channels only for
                                          innovativeness.         are usually less broached, required         interests. This complements their deal               networking and
                                                                  skills are more special and marketing       sourcing behavior. Communication of                  communication of
                                                                  is more complex. Innovation-related         deals via social media and a website                 investments.
                                                                  strategies are generally complemented       targeted at network partners is a diffe-
                                                                  by comprehensive support.                   rentiation feature of top performers.                % oF CVC uNITS CoMMuNICATINg...

                                                                                                                                                                             + 100% Corporate Information
                      % oF CVC uNITS SEgMENTED By INDuSTRy        This contradicts the common presump-        Similar to external collaboration,                   22%
                                    PRoVIDINg SuPPoRT IN...       tion, that innovativeness is disrupted      communication is most practiced
                                                                                                                                                                                              + 100% CVC unit Information
                                                                  by intensive support. Opportunities of      and desired in the Media & ICT cluster.              56%
                                                            80%
Strategic and Financial Advice + 7%                         75%   external partner involvement in ven-        Communication strategies seem to                     22%
                                                                                                                                                                               - 50% Investment Deals
                                                                                                                                                                   33%
                      Research - 15%                        60%   ture support are not yet fully exploited,   be under-developed regarding the
                                                                                                                                                                   22%         - 50% For Networking Purposes
                                                            71%
                                                                  in particular in comparison to IVCs.        common focus of many CVC units on                    33%
                                                            40%
         Sales and Distribution - 44%
                                                            71%
                                                                  Most external support is provided by        public relations and the common
                                                            67%   suppliers and other corporations and        network focused-deal source structure.
                    Marketing + 415%                                                                                                                                     Top Performer
                                                            13%   investors.
                                                            22%                                                                                                          underperformer
                            Manufacturing - 33%
                                                            33%                                               oVERALL uTILIzATIoN oF CoMMuNICATIoN CHANNELS...
                                                            33%
                        Human Recources + 136%
                                                            14%
                                                                                                                                        VC and Entrepreneurship
                                                                                                                                                Events and Fairs
                                                                                                                        16%
                                                    ICPS                                                                                      Print Media
                                                                                                                  12%             41%
                                              Media & ICT
                                                                                                                                                 Social Media
                                                                                                                 9%
                                                                                                                                              Associations
                                                                                                                                                                                                                  Introduction
                                                                                                                          22%                                                                                    Methodology
                                                                                                                                             Websites
                                                                                                                                                                                                               Strategic Setup
                                                                                                                                                                                                         Investment process
                                                                                                                                                                                                        Internal Collaboration
                                                                                                                                                                                                                   Conclusion
                                                                                                                                                                                                                       Contact
P11.




     Internal                 relationShipS to buSineSS                   long-term horizon                         % oF CVC uNITS uNDERLININg
                                                                                                                    THE CHALLENgE oF...
                              unitS anD top management                    Successful CVC units give high scores
collaboratIon                 Converting and transferring the ventu-
                              ring output within the wider organiza-
                                                                          to their parents‘ ability to manage
                                                                          expectation and to create a long-term     67%                 + 168% Encourage long-term thinking and
                                                                                                                    25%                        support from the corporate parent
      Top performers stress   tion is a further key value driver. Thus,   horizon for the venturing activity.
                                                                                                                    67%
      the need for a strong   building strong ties to the corporate       Nevertheless, they still regard it as a   50%
                                                                                                                                        +34% Foster internal collaboration and
                                                                                                                                             alignment between Bus and the CVC unit
      cooperation between     parent and the BUs is considered a          major challenge.
         the business units   major task by top performers.                                                            Top Performer
         and the CVC unit.
                                                                                                                       underperformer
          They understand     The ability of the top management
           the challenge to   to motivate BUs to cooperate with the
      generate a long-term
                              CVC unit is positively correlated to
        oriented horizon of
                              performance and regarded a major
        expectation within
                              point of critic on the corporate
           the corporation.
                              parent and challenge by CVC units.                    top management
                              Top performers additionally criticize
                              the lack in financial commitment and
                              flexibility of the parent.

                              Underperformer and younger CVC units
                              have problems to manage expectations
                              towards the top management.
                              However, they do not regard internal
                              communication a major challenge.
                                                                                                                                        business Units

                                                                          CVC Unit
                                                                                                                                                              Introduction
                                                                                                                                                             Methodology
                                                                                                                                                           Strategic Setup
                                                                                                                                                       Investment Process
                                                                                                                                                  Internal collaboration
                                                                                                                                                               Conclusion
                                                                                                                                                                   Contact
P12.




conclusIon                  SucceSS factorS by performance impact

   Critical performance                                     1.                 EFFECT oN PERFoRMANCE
   drivers are primarily                                STraTegIC                           High
           found within                                   SeTuP                             Medium                   venturIng trends
          strategic setup                                                                   Low                      Innovation Centers               Innovation
            and internal                             Strategic orientation                  Insignificant            Being less of a deal sourcing    Incubation Initiative
          collaboration.                                                                                             tool, rather than a hub for      Approach is appreciated by
                                                     financial orientation                                           innovation related activities,   firms scoring high in strate-
      However, process
         phases such as                                                                                              innovation centers rather        gic orientation and internal
                                                     Strategic ambiguity
     deal sourcing and                                                                                               complement the strategic         collaboration, due to its inte-
   syndication have as                               Performance Measurement                                         orientation of the corporate     grated intra corporate setup.
                                                                                                                     venturing activity.
    well a vital impact                              Process Capabilities                                                                             Micro Seed Funds
        on performance.                                                                3.                            Targeted Innovation              Firms emphasizing deal
   Relevance of certain                                                            InTernal                          Campaigns                        sourcing, internal collabo-
         success factors                                                        CollaboraTIon                        They are regarded an effici-     ration and strategic orien-
   differs with industry                                                                                             ent deal sourcing tool as        tation appreciate the value
            background.                                                                                              firms having a high finan-       added of this approach, be-
                                                                                relationship to bus
                                                                                                                     cial orientation and an ac-      cause it sources seed stage
                            MEDIA & ICT                                         relationship to CP
                                                                                                                     cent on deal sourcing attest     start-ups on a large scale.
                            High Industry Specific                                                                   large value added to this
                            Performance Impact               2.                 long-Term Horizon                    approach.
                                                        InveSTMenT
                                                          ProCeSS

                                                     deal Sourcing


                                                     external Collaboration


                                                     Syndication

                                                     venture Support
                                                                                                                                                                      Introduction
                                                     exit Strategy                                                                                                   Methodology
                                                                                            ICPS
                                                                                            High Industry Specific                                                 Strategic Setup
                                                     external Communication                 Performance Impact
                                                                                                                                                               Investment Process
                                                                                                                                                            Internal Collaboration
                                                                                                                                                                      conclusion
                                                                                                                                                                           Contact
P14.




contact   Prof. Dr. Marc Drüner
          marc.druener@td-berlin.com

          Lars-Alexander Mayer
          lars-alexander.mayer@td-berlin.com

          Philipp Dauderstädt
          pd@corporateventurestudy.com

          Scientific aDviSor                        contact us to discuss the
          Prof. Dr. Volker Trommsdorff
          TU Berlin
                                                       implication of the
                                                     study results for your
          meDia partner
          Global Corporate Venturing Magazine
                                                      corporate venturing
          www.globalcorporateventuring.com                  strategy.
          trommsdorff + drüner
          innovation + marketing consultants GmbH
                                                     We are looking forward
                                                         to meeting you!
          Rosenstraße 18
          10178 Berlin

          Fon  +49 (0) 30 278760-0
          Fax  +49 (0) 30 278760-66

          www.td-berlin.com                                                          Introduction
                                                                                    Methodology
                                                                                  Strategic Setup
                                                                              Investment Process
                                                                           Internal Collaboration
                                                                                      Conclusion
                                                                                         contact

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Success Factors Corporate Venturing

  • 2. P02. Key InsIghts »Benefits of corporate venturing are diverse. Thus corporate venture capital units can pursue multiple goals simultaneously, as long as they are aligned to corporate needs, clearly communicated within the organisation »Understanding internal and external and monitored on a long-term basis by deal sources and innovation hot spots, a concisely defined metric set. in terms of market and technologies, constitutes an integral part of corporate venturing activity. »Financial interests and innovation- related strategies are not mutually exclusive. »Assessment of investment opportuni- ties has to be done in cooperation with external partners and can be a time- »Corporate venturing units have to critical issue in some industries. operate autonomously, but be deeply rooted in corporate innovation strategy and connected to business »Processes integrating internal units to unfold their full potential. and external parties, inspired by new venturing approaches, have to be established, either by collaboration agreements or joint equity (syndication). Introduction Methodology Strategic Setup Investment Process Internal Collaboration Conclusion Contact
  • 3. P03. IntroductIon The importance of corporations in venture capital (VC) has increased 120.000 Rather Financial Focus Rather Strategic Focus 30% Corporate venturing continuously, especially with respect 100.000 25% becomes a core to the number of deals they are invol- tool in innovation ved in. management. 80.000 20% Defining and At the same time corporate venturing measuring success (CV) strategies shifted from financial 60.000 15% factors is the key to more strategic objectives supporting performance driver. the innovation process. 40.000 10% The shift had no impact on the amount 20.000 5% of funding, but can explain the incre- asing share of deals with corporate 0 0% venture capital (CVC) involvement, as 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 many innovation-related objectives are Data: National Venture Capital Association 2011 based on deal diversity rather than on Total VC Investment in $M (LHS) deal size. Total CVC Investment in $M (LHS) % of $ Coming from CVCs (RHS) Definition and measurement of suc- % of Deals with CVC Involvement (RHS) cess factors is the most critical factor in 75 0/0 of the underperformers launching and running a successful CVC but only 22%0/0 of the unit. This challenge intensifies as CVC top performers regard the units shift their emphasis from purely definition and measurement of financial to innovation-related goals. success factors as a major General developments, such as shorter challenge. technology life cycles and the fragmen- tation of knowledge, further challen- ged traditional processes. Introduction Methodology Strategic Setup Investment Process Internal Collaboration Conclusion Contact
  • 4. P04. ACTIVITy (Number of Portfolio Companies) Methodology In this study performance is approxi- mated by a function of continuity and 50 Positive Performance Negativ Performance 45 Financial returns activity, since financial returns are fre- do not represent the quently disclosed and do not represent 40 entire strategic the entire strategic value. It is assumed 35 value of corporate that continuity of the CVC units in the & ICT Media venturing activities. market and the respective current level 30 Performance can of activity provides an approximation to 25 only be approxima- the strategic value added to the corpo- ted and has to be ration. Firms would limit the venturing 20 ICPS seen in an industry activity in case of no value creation. To context. 15 control for differences in industries, the sample was segmented by investment 10 focus resulting in the two clusters (1) 5 Media & Information and Communica- CoNTINuITy (years of Experience) tion Technology (ICT) and (2) Industry 0 0 2 4 6 8 10 12 14 16 18 20 and Consumer Products and Services Analysis based on global online survey (CVC units, n=19; VCs, n=98) and focus interviews (n=91) among managing directors of CVC and VC (ICPS). The Media & ICT cluster is charac- units; Absolute performance represents the distance to the industry averages, divided by the industry specific standard deviation. terized by a larger deviation of activity and continuity and more venturing experience. Top performers are located 1. Media & ICT 2. Industry & Consumer Product Services (ICPS) Electronics, Media & Entertainment, Chemicals, Business Products & Services, Consumer Products & above the respective industry averages Telecommunications, Computer & Peripherals, Services, Financial Services, Life Science & Healthcare, Supply Chain/ (trendlines), underperformer below. Software & IT Services Logistics, Energy & Renewables, Materials, Manufacturing The data used originates from a comprehensive online survey among 19 CVC units from 8 countries. The questionnaire was based on a large number of focus interviews among Introduction CVC units and independent venture Methodology capitalists (IVCs). In addition, an Strategic Setup adapted version of the online survey Investment Process was conducted among almost 100 IVCs. Internal Collaboration Conclusion Contact
  • 5. P05. Methodology Strategic Setup (1) is defined as the initial setup of strategy HyPoTHESIzED SuCCESS FACToR By PRoCESS PHASES Three phases and objectives and the respective 1. 2. 3. constitute the performance measurement. Further, re- STraTegIC InveSTMenT InTernal SeTuP ProCeSS CollaboraTIon corporate levant process capabilities, in particular venturing process: process acceleration capabilities, have Strategic orientation deal Sourcing relationship to bus (1) The Strategic to be developed. Setup, (2) The Investment inveStment proceSS (2) related factors financial orientation external Collaboration relationship to CP Process and (non equity partnering) range from deal generation to external (3) Internal relations and are regarded on a deal Collaboration. basis, but implemented parallel. Strategic ambiguity Syndication long-Term Horizon (joint equity partnering) Continuous internal collaboration (3) with the corporate parent (CP)and its business units (BUs) is a major point Performance Measurement venture Support of differentiation of CVC units from IVCs. SuCCESS FACToR IN CoRPoRATE VENTuRINg MoDEL Process Capabilities exit Strategy InTernal CollaboraTIon InveSTMenT ProCeS external Communication STraTegIC SeTuP DIMENSIoNS oF ANALySIS InduSTry effeCT on SPeCIfICS PerforManCe Introduction Methodology Strategic Setup The corporate venturing framework is based Investment Process on a literature review and focus interviews. Internal Collaboration Conclusion Contact
  • 6. P06. STRATEgIC goALS By PERFoRMANCE TyPES... strategIc Strategy Contrary to conventional wisdom top 100% setup Technical Innovations + 0% 100% performers tend to follow a wider 89% range of innovation-related strate- Window on Technology 67% + 32% Defining innovation- gies rather than focusing on one core Business Model Innovations 67% + 0% 67% related goals, business line, while taking into account 78% open New Markets + 77% without neglecting the importance of financial benefits. 44% 67% financial objectives The dual focus on financial and strategic Financial Interest 44% + 52% is a core performance objectives of top performer showcases 44% + 16% Improve Corporate Image on Innovation 38% driver. Performance on the one hand the multiple benefits 44% measurement should Ecosystem Development + 100% of corporate venturing in the manage- 22% be based on either 22% - 33% ment of innovation, on the other hand Control for Potential Future Competition 33% a qualitative or the need of financial return to legitimate Make use of Non-Streategic Intellectual Property 33% + 154% quantitative metric 13% the venturing activities in the long run. 33% set. Promote Corporate Entrepreneurship + 154% 13% 11% performance meaSurement Improve Consumer orientation 25% - 33% Top performers measure the impact of Attract and Retain High Potentials 11% + 100% their corporate venturing activities by a clear set of either qualitative or quanti- Top Performer tative Key Performance Indicators (KPIs) underperformer with a long-term horizon. STRATEgIC PLANNINg oN KPIS QuALITATIVE VS. QuANTITATIVE KPIS 44% 57% 56% 44% Top Performer 14% 43% 43% 22% 22% 56% underperformer Short-Term (<6 Month) Quantitative Medium-Term (6-24 Month) Qualitative Long-Term (>24 Month) Dual Introduction Methodology strategic setup Investment Process Internal Collaboration Conclusion Contact
  • 7. P07. strategIc Strategy & performance meaSurement MedIa & ICT STRATEgIC goALS By PERFoRMANCE TyPES... ICPS setup Accessing technological innovations is the major focus of all CVC units. + 0% 100% 100% Technical Innovations 100% 100% + 0% 100% Window on Technology 80% Industry This underlines the role of CVC in the + 33% 75% 60% + 33% background shapes management of innovations. - 50% 50% Business Model Innovations 80% + 33% 75% 60% strategic setup. Creating a ‘window on technology’ is 75% 80% + 200% open New Markets + 33% Process acceleration generally considered important, but is 25% 60% 75% 80% capabilities are more relevant in the Media & ICT cluster, +50% 50% Financial Interest 60% +33% primarily relevant due to shorter technology life cycles. 60% -100% Improve Corporate Image on Innovation + 50% in the Media In the ICPS cluster top performers show 50% 40% 50% 20% and ICT cluster. + 100% Ecosystem Development + 100% a stronger focus on ‚soft‘ objectives 25% 25% 40% related to image, culture and human - 100% 50% Control for Potential Future Competition 20% + 100% resources. + 100% 25% Make use of Non-Streategic 20% + 0% Intellectual Property 20% 25% 40% + 100% Promote Corporate Entrepreneurship + 60% Quantitative performance indicators 25% 25% 60% are more common in the Media & ICT + 0% 25% Improve Consumer orientation 50% + 50% cluster, which can be explained by - 100% Attract and Retain High Potentials 60% + 200% 50% 20% their greater emphasis on financial objectives and their generally larger Top Performer experience in venturing. underperformer 10 0/0 of the CVC units in proceSS capabilitieS the ICPS cluster regard their In the Media & ICT cluster process processes as fast compared capabilities, in particular investment to 63 0/0 in the Media and speed but also process flexibility, are ICT cluster considered to be more relevant and media should be part of the strategic setup. and ict Introduction icps Methodology strategic setup Investment Process Internal Collaboration Conclusion Contact
  • 8. P08. InvestMent Deal Sourcing Even though proactive and structured process deal sourcing is broadly acknowledged, not all CVC units seem to have long- Top performers, term-oriented processes in this regard. venturIng trends especially in Deals are primarily sourced through New venturing approaches will rethink traditional ICPS cluster, do the personal network, whereas top deal sourcing, external collaboration and venture recognize the need performers concentrate further on deal support models. for a systemized ap- sourcing via syndication partners. proach in deal sour- Top performers have a much CVC units show a very po- cing and defining stronger ambition to open- sitive attitude towards more This network dominated deal source up their processes by incor- external collaboration and relevant technology structure suggests an opportunistic porating open innovation communication, especially and market targets. behavior, which explains the barely elements in their venturing in the Media & ICT sector, long-term oriented approaches in deal approaches than underper- nevertheless CVC units are sourcing. The ICPS cluster shows the formers. They appreciate less open than VCs. The approaches related to sour- progressive attitude in the strongest interest in this issue, which cing and nurturing seed Media & ICT sector and can be explained by their limited expe- and early stage ventures of IVCs indicates that an rience in corporate venturing and the and mainly value benefits established venturing cul- fast development of technologies in such as networking with ture has a positive effect on many sub-segments. entrepreneurs and global openness. sourcing of new ideas. % oF CVC uNITS HAVINg LoNg-TERM (>24MoNTH) % oF CVC uNITS uNDERLININg THE CHALLENgE PLANNINg APPRoACH IN oF SouRCINg 78% 56% Industry/Market Focus + 16% + 124% Sourcing of investment oppurtunities 67% 25% 56% 56% Technology Focus -16% + 124% Indentification and definition of target 67% 25% industries, markets and technology 22% Deal Sources + 0% 22% Introduction Methodology Top Performer Strategic Setup underperformer Investment process Internal Collaboration Conclusion Contact
  • 9. P09. InvestMent external collaboration Only a minority of CVC units involve a SynDication Joint investments are an attribute of Top performers strongly syndicate process broad range of external partners on a continuous basis in their processes; top performing CVC units, showing that those CVC units have realized the value with other investors – in particular with Investment decisions consequently only few do long-term added by diversified corporate venture other corporations. are supported by planning in this regard. However, top support and deal evaluation. Further external partners performers involve selected external perceived key benefits are deal referrals such as other partners such as CVC units, IVCs, tech- from co-investors and mitigation of risk. investors, industry % oF CVC uNITS uNDERLININg THE CHALLENgE oF... nology and industry specialist, busi- Compared to their independent coun- experts, research institutions and ness angels, consumers and lawyers terparts, CVC units focus slightly more 67% + 415% Finding adequate co-investors 13% consumers. in their investment decision. Further, on joint investments with ICVs and other top performing CVC units, like IVCs , corporate investors. However, CVC units have a much more positive perception take more than two times less often of benefits in external collaboration. the lead in investments, which can be SyNDICATIoN BEHAVIoR By PERFoRMANCE TyPES... Potential of universities, incubators and explained by their historical follower consumers remains largely untapped. position. 89% + 33% Syndicate Beside trust, the integration of external 67% knowledge is perceived the biggest 78% + 136% Syndicate with 33% other corporations challenge, in particular by top perfor- 44% + 100% Lead Investor mers. External collaboration is strongest 22% and considered most relevant in the Media & ICT cluster. Top Performer underperformer LEVEL oF oVERALL ExTERNAL PARTNER INVoLVEMENT... Top Performer 33% 56% 11% 50% 40% 10% ICPS underperformer 33% 44% 22% 13% 63% 25% Media & ICT High High Medium Medium Low Low Introduction Methodology overall external partner involvement construct ist based Strategic Setup on continuity and diversity Investment process Internal Collaboration Conclusion Contact
  • 10. P10. InvestMent venture Support The industry context plays a major external communication Despite the general interest in In line with their deal sourcing process role in the type of support provided. Marketing and human resources increasing visibility, top performers communicate investment deals and behavior, top performers use Intensive support support is for example much more networking relevant information, communication does not limit relevant in ICPS cluster, as these issues rather than corporate and CVC unit channels only for innovativeness. are usually less broached, required interests. This complements their deal networking and skills are more special and marketing sourcing behavior. Communication of communication of is more complex. Innovation-related deals via social media and a website investments. strategies are generally complemented targeted at network partners is a diffe- by comprehensive support. rentiation feature of top performers. % oF CVC uNITS CoMMuNICATINg... + 100% Corporate Information % oF CVC uNITS SEgMENTED By INDuSTRy This contradicts the common presump- Similar to external collaboration, 22% PRoVIDINg SuPPoRT IN... tion, that innovativeness is disrupted communication is most practiced + 100% CVC unit Information by intensive support. Opportunities of and desired in the Media & ICT cluster. 56% 80% Strategic and Financial Advice + 7% 75% external partner involvement in ven- Communication strategies seem to 22% - 50% Investment Deals 33% Research - 15% 60% ture support are not yet fully exploited, be under-developed regarding the 22% - 50% For Networking Purposes 71% in particular in comparison to IVCs. common focus of many CVC units on 33% 40% Sales and Distribution - 44% 71% Most external support is provided by public relations and the common 67% suppliers and other corporations and network focused-deal source structure. Marketing + 415% Top Performer 13% investors. 22% underperformer Manufacturing - 33% 33% oVERALL uTILIzATIoN oF CoMMuNICATIoN CHANNELS... 33% Human Recources + 136% 14% VC and Entrepreneurship Events and Fairs 16% ICPS Print Media 12% 41% Media & ICT Social Media 9% Associations Introduction 22% Methodology Websites Strategic Setup Investment process Internal Collaboration Conclusion Contact
  • 11. P11. Internal relationShipS to buSineSS long-term horizon % oF CVC uNITS uNDERLININg THE CHALLENgE oF... unitS anD top management Successful CVC units give high scores collaboratIon Converting and transferring the ventu- ring output within the wider organiza- to their parents‘ ability to manage expectation and to create a long-term 67% + 168% Encourage long-term thinking and 25% support from the corporate parent Top performers stress tion is a further key value driver. Thus, horizon for the venturing activity. 67% the need for a strong building strong ties to the corporate Nevertheless, they still regard it as a 50% +34% Foster internal collaboration and alignment between Bus and the CVC unit cooperation between parent and the BUs is considered a major challenge. the business units major task by top performers. Top Performer and the CVC unit. underperformer They understand The ability of the top management the challenge to to motivate BUs to cooperate with the generate a long-term CVC unit is positively correlated to oriented horizon of performance and regarded a major expectation within point of critic on the corporate the corporation. parent and challenge by CVC units. top management Top performers additionally criticize the lack in financial commitment and flexibility of the parent. Underperformer and younger CVC units have problems to manage expectations towards the top management. However, they do not regard internal communication a major challenge. business Units CVC Unit Introduction Methodology Strategic Setup Investment Process Internal collaboration Conclusion Contact
  • 12. P12. conclusIon SucceSS factorS by performance impact Critical performance 1. EFFECT oN PERFoRMANCE drivers are primarily STraTegIC High found within SeTuP Medium venturIng trends strategic setup Low Innovation Centers Innovation and internal Strategic orientation Insignificant Being less of a deal sourcing Incubation Initiative collaboration. tool, rather than a hub for Approach is appreciated by financial orientation innovation related activities, firms scoring high in strate- However, process phases such as innovation centers rather gic orientation and internal Strategic ambiguity deal sourcing and complement the strategic collaboration, due to its inte- syndication have as Performance Measurement orientation of the corporate grated intra corporate setup. venturing activity. well a vital impact Process Capabilities Micro Seed Funds on performance. 3. Targeted Innovation Firms emphasizing deal Relevance of certain InTernal Campaigns sourcing, internal collabo- success factors CollaboraTIon They are regarded an effici- ration and strategic orien- differs with industry ent deal sourcing tool as tation appreciate the value background. firms having a high finan- added of this approach, be- relationship to bus cial orientation and an ac- cause it sources seed stage MEDIA & ICT relationship to CP cent on deal sourcing attest start-ups on a large scale. High Industry Specific large value added to this Performance Impact 2. long-Term Horizon approach. InveSTMenT ProCeSS deal Sourcing external Collaboration Syndication venture Support Introduction exit Strategy Methodology ICPS High Industry Specific Strategic Setup external Communication Performance Impact Investment Process Internal Collaboration conclusion Contact
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  • 14. P14. contact Prof. Dr. Marc Drüner marc.druener@td-berlin.com Lars-Alexander Mayer lars-alexander.mayer@td-berlin.com Philipp Dauderstädt pd@corporateventurestudy.com Scientific aDviSor contact us to discuss the Prof. Dr. Volker Trommsdorff TU Berlin implication of the study results for your meDia partner Global Corporate Venturing Magazine corporate venturing www.globalcorporateventuring.com strategy. trommsdorff + drüner innovation + marketing consultants GmbH We are looking forward to meeting you! Rosenstraße 18 10178 Berlin Fon  +49 (0) 30 278760-0 Fax  +49 (0) 30 278760-66 www.td-berlin.com Introduction Methodology Strategic Setup Investment Process Internal Collaboration Conclusion contact