5 pitfall practices in corporate venturing

Corporate Venturing is already happening in many companies and industries, but not necessarily in the right way. Below, we list 5 of the main bad practices we encountered during our experiences.

Ad hoc ‘spray and pray’

A lot of companies invest in or acquire startups that they encounter due to pure coincidence. Even in very large companies, it’s often the nephew, neighbor or best friend of an executive running a cool business that suddenly gets the attention. Just because of the relationship. Or a startup that knocked on the door on a blue Monday morning, and which somehow stumbled into a meeting with the CFO. It’s very often first-come, first-served without a real analysis, comparison or strategy behind it.

For every AI, Blockchain, AR … company you come across, there are many others you should investigate before making the call to move forward. Don’t let things depend on coincidence, set up a thorough analysis process and surround yourself with subject matter experts.

The corporate ‘black hole’

Once an investment or acquisition has been made, many companies feel the urge to ‘professionalize’ the business they’ve attracted. Processes are put in place, roles are reshuffled, offices are moved to a corporate-like environment, they have to connect to big IT systems … All of this happens with the best intentions, but in many cases, it’s killing the vibe and soul of the startup.

It’s very good to help a business take the next step, but always let freedom of execution rule. Don’t hug them to death. Have clear conversations with the venture on how much of your involvement they want and in what area they will need it. This will help both parties to manage their expectations and hold each other accountable when they are crossing the line.

Purely financial constructions

Many companies ask what the financial ROI is of investing/acquiring startups. The return of Corporate Venturing is, however, multi-fold, the potential financial upside is just one dimension. Unfortunately for many companies, it’s the only dimension, the investment or acquisition is done by financial departments and from there on it’s just looking at the numbers on a regular basis. But both parties, the startup and the company can benefit so much from each other in terms of knowledge sharing and culture.

Corporate Venturing is not just a financial thing, it’s a way to drive new knowledge, spirit and culture throughout your company. Make sure it’s not just a box in an Excel sheet for the nance people, exploit the collaborations throughout your whole organization.

To be cool or to check the CSR box

Startups have become a cool concept over the years, so collaborations are often misused for PR reasons. Companies want to show off their innovative image and try to impress the market by doing things they actually don’t fully understand. This often leads to zero-impact venturing, as it’s more about the image then the core business, not to mention the disillusionment for the startups.

Go for real value, not PR value in your Corporate Venturing activities, it will only backfire in the long run.

No endgame in mind.

In most cases, the investment or acquisition is seen as the endpoint, while it should actually be the starting point. If you take a 25% stake in a startup, it is in your best interest to also think about the next steps: are you going to invest further? Do you want to buy the whole company later on? Do you want to go for an exit strategy? How do you want to relate to other investors that will join later on? Try to be clear what your end game is towards all the partners around the table. The people in a startup are its true asset, so avoid miscommunication and false expectations.

Every collaboration should have a clear way forward, not just for yourself but also for the startup you’re partnering. Don’t expect the business to figure everything out by themselves, they will need you for guidance and you need them too.

Corporate Venturing Book

The newest book of Dado Van Peteghem (from Duval Union Consulting) and Omar Mohout (Sirris) provides insights in the different strategies and tactics to accelerate innovation and growth through collaboration, as well as plenty of cases as examples where these methods are successfully applied. It’s a no-nonsense, ready-to-apply comprehensive guide for creating and reviewing your corporate venturing strategy as a strategic instrument to thrive in this fast changing world.

If you want to read the 10 key learnings about the book Corporate Venturing, check out the e-book here!

The book will provide guidance, insights, perspective and inspiration for anyone that has an interests in corporate venturing as a strategy to accelerate growth. Whether you are a large corporate or an upcoming player in the market.