In the start-up community innovation and disruption is funded by Venture Capital money, or at least that is the primary perception that exists. Start-ups that wish to grow aspire to secure funding and the source for investment that everyone talks about is VCs.
Without a doubt, venture capital companies get all the headlines and the majority of the investment opportunities. They drive innovation and have a strong influence in where industries how and how little-ideas can grow and challenge established processes and practices.
Earlier this year though I was asked to hold a session at the the Global Corporate Venturing Symposium (#GCV2018), which was held in London. The subject that I was asked to focus on was, ‘how can Corporate Venture Capital companies [CVCs to you and I] support start-ups more effectively?’
CVCs have a history of sitting in the background. Their remit is different to that of venture capital companies, but the experience and support they can offer a start-up can be greater.
Since May I let the conversations that were had sink in. Spending time watching how CVCs make their decisions and how they offer support, which is why it’s taken me some time to write about it.
The session at GCV2018 was led by myself, Sharon O'Dea - Founder of Lithos Partners and Lee Sessions - Managing Director, Global Corporate Venture Relationships at Intel Capital. Our remit was to, in plain English, identify key non-financial areas where CVCs can support start-ups.
Unlike VCs, CVCs are an extensions of a company. They are often set-up to invest in third party companies, most commonly in those that are small but innovative in their same industry sector in which the parent company operates. They invest in what the company might see as the future, and as a result the investment that they make can give them a possible competitive advantage in the future.
Some key advice that was identified for start-ups included:
Don’t just think of securing investment from Venture Capital firms
Start-ups should make a plan and identify, aside from cash, what other areas of support they can contribute towards
Consider investment from multiple CVCs. Each CVC or VC has different skills that together can help your business grow.
Culture and reputation matters. It can make or kill your business or product
While the cash pays the bills, the human experience from the investor can help grow your business and transform you into a slick professional operation
Don’t be over ambitious, CVCs are good at spotting busllshit. Think long-term and research the strategic direction of both the CVC and it’s parent company, some might be after a short-term return, others are more pragmatic and might hold a longer-term that is more in line with your business plan
Listen to the hard truths and feedback you receive from prospective VCs and CVCs
Don’t forget about the skills needed to building a successful business. Building a great product is very different to building a great business. If your business fails, the IP of your products can be bought on the cheap
Investment is also about a mutually beneficial relationship. A funder is a partner
Be prepared for failure. Few think or plan for this, after all failure to prepare is preparing to fail.
Corporate venture capitals like Intel Capital have decades of experience in business and the technology sector gained from their parent company. The way they leverage this helps keep their business at the front with eyes over the horizon.
If you are a start-up in the tech space, getting investment from Intel Capital is getting leverage from the Intel brand, which can support in conversations elsewhere. This is why reputations matters when you are looking to scale a business.
The experience that CVCs have is often down-played, but learning from their business environment can help build a better business.