A recent development in the investment opportunity market, corporate venture capital is gaining momentum as more companies realize the potential for becoming venture capitalists. Distinguished from traditional venture capital opportunities, the corporate venture capitalist is a company that seeks to invest in start-up corporations that may or may not have ties to the company’s holdings.
Generally handled without the intervention of a third party investment firm, the corporate venture capital is done to gain a specific advantage within their industry.
Benefits of Corporate Venture Capital
The large amount of capital that large corporations generally have available is prime investment opportunity. In addition, working with smaller start-up corporations generally allows companies the opportunity to stay up-to-date on the latest trends in technology and advancements. This can help the company innovate new methods faster and bring new and emerging technologies to consumers faster.
The additional benefits to being the recipient of corporate venture capital can be seen in the relationship that is developed between the two companies. The start-up can benefit from the experience and processes of the established company, which can help navigate the waters of regulations and customer demands.
Identifying potential benefits to both the corporation and the start-up are essential in the initial pitch for corporate venture capital. Finding ways that the relationship can be mutually beneficial will increase the likelihood of success. Start-ups generally can respond faster to changes within an industry and can react quicker to necessary adaptations, making them a viable source of information and direction for a larger company that wishes to remain current. The start-up can also be a means to generating a demand for the company’s own products, creating a give and take relationship that will benefit both companies.
Establishing a corporate venture capital fund can be risky, but as more and more companies begin to realize the benefits, the potential for these types of investments will continue to grow.