The initial indications of the emerging economic recovery bode well for the future of corporate venturing organizations, especially for the next three to five years, after a period of retrenchment.
During this recent economic downturn we have experienced the typical retreat/retrenchment of the corporate venturing community. Generally this was manifested by a curtailment of investments, in many cases to zero dollars, while some corporate venturing groups were actually dismantled.
This response to downturns in the economy is actually not unusual. The relatively short history of corporate venture capital, roughly 40 years, is rife with stop-and-go activities and downturns usually brought about the complete demise of corporate venturing.
A significant change seems to have occurred during the internet bubble when, despite the very large number of corporate venturing groups that were formed in the late 1990s and closed down in the early 2000s, a significant nucleus of such organisations maintained their continuity, apparently having proven their value to the corporation. Today’s corporate venturing function has come a long way from earlier efforts.
It has painfully learned the lessons of managing internal issues as carefully as external relations, balancing strategic goals with financial returns, ensuring robust dealflow and entering into mutually beneficial deals. Perhaps even more importantly, today’s corporations are now in greater need than ever for the corporate venturing function.
With the focus on open innovation they have minimised their internal capabilities to develop new technologies and are depending on sourcing a great deal from the outside. In the past, the corporate venturing flow could be turned off periodically and the internal pipeline would carry the load, but today that response is unlikely.
What we are beginning to observe during the past four to five months is a hint that new corporate venturing organisations are being structured and that many existing ones are once again accelerating their activities.
This trend should pick up speed and flourish during the next few years. The next goal for corporate venturing organisations is to hone their skills for maximising the actual strategic benefit that must be derived from their portfolio investments if the func- tion is to be considered valuable by the parent company.