Corporate Venturing Shifts Gears

Corporate Venturing Shifts Gears

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Corporate Venturing Shifts Gears

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    Corporate Venturing Tools Now Include More Than CVC

    CVC has been the mainstay of corporate venturing. Companies have used CVC to take minority equity stakes in start-ups to reap financial returns, gain an early understanding of new markets or technologies, or expand strategic options over the medium term. Today, CVC continues to be an important tool for corporate venturing. However, companies are also expanding their venturing repertoire. (See Incubators, Accelerators, Venturing, and More: How Leading Companies Search for Their Next Big Thing, BCG Focus, June 2014.) The purpose of this expansion is to enable more active searching for innovation that complements an internal R&D effort and ultimately increases the speed, agility, and scope of innovation.

    An accelerator or incubator is the most common alternative to CVC, providing short- or medium-term support and resources to start-ups. The sponsors of such an entity gain the opportunity to quickly become acquainted with a broad variety of new business ideas in their search fields. Accelerators offer highly structured programs that typically last no more than three months. These programs provide start-ups that do not yet have proven products or services with the facilities, resources, and expertise needed to speed their product development and time to market. By contrast, incubators offer longer-term programs—typically lasting a year—that include mentoring and access to corporate resources, both of which enable start-ups with proven products or services to develop business models in order to go to market. The functions performed by an accelerator are closely related to those of an incubator, so the terms are often used interchangeably. For the purposes of this report, therefore, accelerators and incubators are considered one type of corporate venturing tool.

    Innovation labs, which have recently come into increasingly widespread use, function as start-ups within a corporate setting. Teams of in-house innovators convene for short, intensive projects, during which they rapidly prototype new products and services with the aim of developing and market testing a minimum viable product by the end of the project. Innovation labs typically are not in the R&D offices and the projects usually do not involve the in-house R&D department.

    Corporations are employing many other venturing tools as well:

    • “Hackathons,” which bring together software developers in collaborative, intensive workshops to create apps for particular platforms

    • Employee jurors or mentors, who participate in start-up competitions to spot emerging technologies or business models early

    • Scouting missions, which are meetings with start-ups, inventors, or university researchers to seek out innovations

    • Corporate-university partnerships, which are collaborations between corporate R&D departments and university researchers to find promising ideas for further development and investigation

    • Strategic partnerships, which are alliances between corporations and start-ups to bring the latter’s commercial-ready innovations to new or larger markets

    • Start-up acquisitions, which are purchases of young companies and their commercial-ready products by corporations in order to access new technologies or markets

    • Licensing, which enables corporations to apply innovations developed by start-ups to new markets, industry sectors, and customer segments