Last year researchers from IESE highlighted the value of corporate venturing. The paper highlights how corporate venturing is a rapidly expanding endeavor, and corporate investments in startups have grown from 980 in 2013 to 3,232 per year today. This represents a sevenfold rise in investments, up to $134 billion in total. The report outlines three strategies to help join up this corporate enthusiasm for innovation with the difficulties faced by academics in commercializing their work:
- Promote co-investment in early-stage ventures, with a particular focus on proof-of-concept projects. These co-investment funds can test the market validity of discoveries, with companies working alongside scientists to do so.
- Tailor existing investment mechanisms towards tech transfer. The existing European financial SME instruments for scientific startups needs to be adapted and work more effectively with corporate venture funds so that small experiments in selected regions are supported.
- Provide greater support for tech-transfer in Europe, with a particular emphasis on aligning regulatory frameworks to make it easier for startups to scale across borders.
“Corporate venturing is becoming a dominant trend among companies. Additionally, the issue for corporates is no longer where to find start-ups, but rather how to effectively (and a timely way) implement their solutions,” the researchers say. “In the future, it is expected that mechanisms such as the corporate accelerator may be refined, although it is unclear how.”
Surviving the pandemic
A second paper, from the Rotterdam School of Management, Erasmus University (RSM), highlights how corporate venturing can help organizations to survive the pandemic. The paper highlights the various survival tactics used by corporate venturing managers during the pandemic, including rationalization, risk reduction, partner reliability, and opportunity recognition.
While there were generally periods of disruption, the overall state of flux caused by the pandemic resulted in a greater emphasis on innovation within organizations and an increase in the innovation budget for many.
“Maintaining an innovation agenda is paramount for the long-term survival of organizations,” the researchers say. “However, when faced with external shocks, organizations tend to freeze innovation activities, especially the ones that require a larger financial commitment and where the results are more uncertain and further in the future.”
Making it work
After interviewing corporate venturing leaders during the first and second lockdowns during 2020, a number of tips emerged for surviving the pandemic.
For instance, mentality change was regarded as key so that managers could stay positive and leverage their network to look for long-term success. It was also recommended that communication is streamlined, with agile operations developed to allow for maximum adaptability to the changing environment.
This includes the allocation of resources, which needs to be able to change rapidly to ensure that new opportunities are capitalized upon. Given the uncertainty inherent in the pandemic, a diversified portfolio is also recommended.
“Although we expected firm resilience to be highly dependent on the extent to which these firms were hit in their core operations, we found no evidence for this conjecture,” the researchers conclude. “Instead, we found that the organizations with a history of corporate venturing matters were able to sustain operations, while firms with a short history or no history at all were experiencing major difficulties to keep things going.”
