What is corporate venturing and how can companies benefit from it?
Corporate venturing offers interesting options, from investment to partnerships
Corporate venturing takes many forms. At its most basic it can be purely a financial investment with a larger company taking an equity stake in a smaller company. This is often done through a separate fund being set up specifically to invest in startup and growth companies in the same way that a traditional venture capital firm would.
The investment also can be indirect through other venture capital funds or trusts. The larger firm hopes to make a return on its investment when the company is sold or floats on a stock exchange.
It can also be much more than purely financial. Some firms will offer a strategic alliance or support to smaller companies helping them to develop products or services that will generate income or cost savings for both parties. This form of corporate venturing does not have to involve any equity participation or cash injection.
Who does it?
The concept of corporate venturing has existed for many years in the US where many of the top companies have a venture capital fund or offer strategic alliances. While the number of companies involved is much smaller in this country, it has existed for many years and in many sectors.
Traditionally corporate venturing has appealed to high-growth sectors such as pharmaceutical or technology companies. Small, flexible companies in these sectors can challenge industry leaders with new technology that can revolutionise the market place. Among the companies that are involved are Intel and mithKline Beecham. Among the newer entrants are Channel 5, which is offering free advertising airtime to companies in return for an equity stake in the company. Giants of industry such as British Steel and BG, formerly British Gas, also are involved in the sector.
Traditionally corporate venturing has appealed to high-growth sectors.