Corporate venture capital (CVC)

Corporate venture capital (or CVC) is a subset of venture capital (VC). CVC funding comes from large corporates, who invest in smaller businesses that are relevant and beneficial to the parent group.

The corporate offers funding in exchange for a share in the business. As well as finance, the business can also access the expertise, network and contacts of the corporate group.

Businesses looking for CVC funding need to prove how they can help the big corporate through either market insight, market reach or innovative technology. Corporates will be aware of successful, disruptive businesses.

Why do corporates invest in businesses?

There are lots of reasons why CVCs look to invest, but three of the biggest drivers are as follows:

Market sensing

Can the business help the corporate understand how the market is innovating?

Channel co-operation

Has the corporate spotted an opportunity to help the business distribute its product and increase its reach?

Technological knowhow

Will the business help the corporate innovate with cutting-edge technology?

How is it different to venture capital?

Where the money comes from

A venture capitalist (VC) is a third party who manages money on behalf of external investors. Corporate venture capitalists (CVCs) use money from the corporate to fund investments.

How long the relationship lasts

VCs invest in fund cycles of up to 10 years. CVCs often have shorter lifecycles.

Time to finance

VCs typically take six to 12 months to do a deal. With CVC, it can take around two to three months longer.

Expertise and risk

VCs can be investors by trade or they can have a sector background that means they understand the businesses they are investing in.

CVCs, however, are nearly always experts in their field, which can have benefits and downsides for you, as an entrepreneur. On the one hand, CVCs can bring vital knowhow to a business, but you should also be aware that you’re exposing your intellectual property (IP) or unique selling proposition (USP) to a channel competitor.

Why they’re investing

VCs invest in businesses that will provide a financial return. When a CVC looks for a business to invest in, they consider the return on investment (ROI) and whether the business will benefit its strategic capabilities. If the business won’t help develop its strategic capabilities, the CVC is unlikely to invest.