Debunking Myths in Corporate Venture Capital: What Works, What Doesn’t, and How To Make It Happen

Abstract

On paper, large multinational corporations and startups seem like a perfect pairing. Multinationals can open doors for startups, provide them with necessary capital, and deliver tremendous resources in the form of knowledge sharing, distribution channels to seemingly endless rolodexes. The list goes on. And startups can help large and mature corporations stay lean by giving them access to innovation that takes place at the peripheries of their core products or services that may eventually upend the core business itself by being an external source of valuable R&D. These benefits, which seem so hard to pass up on in theory, are largely why so many corporations currently open up corporate venture capital (CVC) arms or groups and offers insight into why many promising startups willingly accept capital from these strategic investors. In this paper, we take a look at the facts to see if these CVC groups measure up to this ideal (and if not what they should do about it).

Keywords: compensation, corporate finance, corporate strategy, corporate venture capital, entrepreneurship, innovation ecosystems, limited partnership, research & development, startups, venture capital

JEL Classification: D02, G34, K20, K22, L21, L22, L25, L26, O30, O31