business exploration

 business exploration

putting company money straight into outside entrepreneurial ventures

CFI is used by over 1.8 million professionals to learn about financial analysis, modeling, accounting, and other topics. Create a free account to access hundreds of financial templates and cheat sheets, as well as more than 20 courses that are always free.

Corporate venturing: What is it?

The process of investing company cash directly into external new enterprises is referred to as corporate venturing, or corporate venture capital. Larger corporations often take this action when they want to invest in start-up businesses that are modest yet creative. They do this by acquiring stock stakes and entering into joint venture agreements. In addition, the investment corporation could provide the startup a line of credit, strategic guidance, and/or experience in marketing and management.

How did business ventures start?

Corporate venture capital (CVC), a subtype of venture capital, was created as a result of the proliferation of new businesses in the technology industry. Gaining a competitive edge and/or gaining access to fresh, creative businesses that might eventually become rivals is CVC's primary objective.

In contrast to pure venture capital, CVC invests in fledgling businesses without the involvement of outside investment firms and without ownership.

Among the biggest participants in corporate venture capital are:

Qualcomm Ventures sales team -> Google Ventures -> https://www.gv.com

Intel Capital

CVCs are also widely used in other areas, such biotechnology and telecommunications. With more than 475 new funds and 1,100 seasoned funds, CVC's market presence is currently expanding quickly.

What goals does corporate venture capital want to achieve?

Corporate venture capital, in contrast, aims to accomplish objectives on both a financial and strategic level. in a calculated way

While financially driven CVCs invest in new companies for leverage, conducted CVCs primarily aim to increase sales and profits of the venture company through direct or indirect deals with startups that use new technologies, market expansion, acquisition target identification, and access to new resources.

Investment exits, such as an IPO or the selling of a company's interest to interested parties, are often used to accomplish this. To maximize financial returns for investors, strategic and financial goals are often integrated.

Which phases of startup are the areas of expertise for CVC firms?

Corporate Venturing Corporations may make investments in early-stage startups at any of the following phases of their expansion and development:

#1 Finance in the Early Stages

Even startups that are able to start up are not yet ready for commercial manufacturing and sales. At this point, a business needs a lot of money for early marketing and product development.

Fund for Seed Capital II

In order to draw in venture investors and pay for early operational costs, seed cash or funds are utilized. Usually, a modest amount of financing is provided initially in return for an ownership share in the company. Some individuals prefer to wait until the firm is established before committing more resources since they see the early capital as dangerous.

#3 Finance for Expansion

Companies that are growing via the introduction of new products, the construction of new plants, the enhancement of existing products, or marketing are given capital.

#4 First Public Offering

For the most part, CVCs aim to eventually attain this ideal condition. The investing business will sell its investment to generate a sizable profit when the fledgling company's shares is made accessible to the general public. The profits would then be put back into other projects with the expectation of generating more money in the future.

#5 Purchases and Mergers

This involves matching the firm with a complementary product or business line that will provide a comparable brand to both businesses, as well as funding the purchase of a startup via an investment fund. The investment corporation will seize the chance to obtain money by selling its share when a potential buyer chooses to acquire the startup. By sharing resources, procedures, and technology with the new business, the merger also helps the funding corporation. Benefits like cost reductions, liquidity, and market position will result from this.

What additional advantages can CVC provide to startups?

A startup business may benefit from a bigger investment company's ecosystem of developed goods, network of contacts, and industry experience in addition to its respected name brand and secure financial position. This connection may potentially result in a partnership between the CVC and its parent company, which would raise the business's worth right now.

CVCs provide as a doorway for prospective acquisitions of inventive, modest entrepreneurs by investment firms. Even as smaller businesses, these investors may surpass the industry titans and hold their dominant positions thanks to CVC's financial and strategic goals. Snapchat and Instagram, which are both now owned by Facebook, are two instances of this.