Corporate venturing is when large companies either take an equity stake in or enter into joint venture arrangements with smaller companies. These innovative or specialist companies will usually receive operational, marketing and management expertise from the larger company. The goal of corporate ventures is to gain specific or aggregate competitive advantages.
There are many types of corporate ventures, such as the basic financial investment of a larger company taking an equity stake in a smaller company. This is usually done through a separate, specific fund with the sole purpose of investing in startup, growth or tech companies. This is usually accomplished just like traditional venture capital firm operations. Most corporate ventures are in high-growth sectors, such as health care, pharmaceutical and technology companies.
These equity investments can also be indirect through alternative venture capital funds or trusts. The larger company hopes to make a healthy return on investment when the smaller company is sold or when it floats on the stock exchange. Sometimes, larger companies will offer support or a strategic alliance to smaller companies in order to help them develop products or services that will generate future income and cost savings for both parties. This type of corporate venture doesn’t involve any cash injection or equity investment.
Career Snapshot – Corporate Development
Corporate venture development is an exciting business field that offers plenty of career opportunities. For example, corporate venture developers will source, research and verify investment and acquisition opportunities. They may document market landscapes, overviews of startups, descriptions of incumbent players and risk management analyses. They need to understand the industry’s market and technology trends in order to provide sound advice and partnerships to business unit teams.
Corporate venture developers analyze investment and acquisition data in order to identify key drivers, commercial assumptions and case reviews for key stakeholders. They may build financial models to evaluate potential risks, structures and expected returns. Some corporate venture developers are involved with formal intelligence gathering and negotiate transactions. Corporate venture developers need to be highly structured thinkers with strong financial and analytical skills to work on complex financial transactions. They should have a degree in finance or investment and experience with mergers and acquisitions (M&A).
Career Snapshot – Director of Corporate Ventures
A director of corporate ventures, strategic partnerships or capital investments is responsible for leading a team of professionals who identify potential partners, create informative insights, build business strategies and finalize marketplace offerings. These directors work with cross-functional partners and stakeholders to fully understand the target customer, industry and product strategy required for optimal results. The deals that they handle may be worth hundreds of millions of dollars, so they must have impeccable attention to detail and communication skills.
These directors are the primary driver of new relationship opportunities that result in new products or services, early stage direct investments and new business models that drive profitability. This job is challenging because directors of capital ventures must align strategic partnerships, promote enterprise marketing and continuously involve stakeholders to make effective business decisions. Any director involved with capital investments must have strong leadership, business development and investment experience to motivate employees to produce results.
A master’s degree in business, finance or related discipline is usually required, but MBAs are strongly preferred. Learn more about the purpose and future of corporate venturing here.