Success factors for corporate venturing

April 18, 2018 | Bas van der Meer |

Corporate venturing through which larger companies participate in new initiatives that lie within or outside the boundaries of the company, seems to be increasing Netherlands. Examples of successful corporate ventures include BeFrank, Knab, Inshared, HelloLaw, 50Five, Tikkie, and the recently launched Peaks. Why have these startups been successful? We distinguish six success factors for corporate ventures.

1: Skills of the team

Research shows that the skillset of a team is the most important success factor for the success of corporate ventures. It needs people who are entrepreneurial, but the founders must also be able to get along with the parent company. This video briefly explains it:

2: Re-use of knowledge

Does a company have a certain technological lead, but is there little demand for that technology? Then it’s time to take that technology to another market. FujiFilm succeeded in this. The company produces membranes and filters that are used among other things, for gas or water purification. For this, the company made use of knowledge gained in the production of photographic products in a corporate venture structure.

Knowledge is exchanged faster between a startup and corporate, if they are located in the same building. Exchanging directors (or allowing them to participate in a supervisory board) is also a great option for stimulating knowledge exchange. According to the Harvard Business Review, appointing a specific team that supervises the transfer of knowledge from startup to corporate is also worth considering.

3: Match startup and corporate goals

Research shows that aligning the objectives of corporates, the venture fund and startups can make more use of the expertise of the parent company. If this is not the case, corporates will make less good investment decisions, attract less attractive startups and it is less likely that useful knowledge will flow from the startups to the corporate.

Make sure that all objectives (of the fund, the parent company and the startups) are aligned with each other. This ensures that start-ups go to the stock market more often, apply for more patents and generally perform better.

4: Ensure simple, streamlined processes

Make sure that you not only guarantee that all objectives match, but also ensure that not too many objectives are pursued. Pursuing too many objectives would mean that managers constantly have to be satisfied. A streamlined approach would offer a solution: by not involving too many internal stakeholders in a new initiative, the dynamics of the startup are preserved.

If the development of a corporate venture is delayed, this does not only mean that corporate venture professionals switch off on the fund and the corporate. It also sends a signal to external investors and startups that the fund is not effective. Such reputation damage is difficult to repair.

5: Dare to fail

The apparent contradiction that lies in the word ‘corporate venturing’ is: avoiding risks can have serious consequences. Developing a startup is a process that involves extreme uncertainty. If all goes well, one or more initiatives will go bankrupt. If that is not the case, then that is a sign that the corporate and the funder lack courage.

Therefore, you should develop the right incentives. Proper incentives ensure that corporate venture professionals focus on maximizing investment successes both strategically and financially. In that case they do not have to worry about minimizing losses or selling startups with losses. A mindset is therefore needed in which the failure of a startup is tolerated. Unfortunately, you often see that the management of the company often pulls the plug if success does not come overnight.

6: Find the right IT partner

Developing the right idea for a startup is the first hurdle that needs to be faced. To ensure that the idea comes to fruition – and can be adjusted in time – it is necessary to find the right IT partner. This party can anticipate new wishes in time, which come about (for example) due to changing market conditions.

Programmers who previously worked with or for startups know what it means to deliver a product in short sprints. They provide the right advice in the field of software and offer added value in that regard. Moqod has that experience and has collaborated with corporate, government and start-up companies, so that we have experience with each of these dynamics.