Without stones, there is no arch – Marco Polo
So the thinking goes. When an exciting technology emerges in a core market, strategic venture capitalists use equity to place an early bet, influence strategy and development, while thoughtfully protecting the downside by not committing fully via merger or acquisition. Assuming the technology is appropriately derisked via further development, a portfolio of early-stage investments provides the strategic with a high-value pipeline of acquisition targets and future growth.
Seems logical. Of course, I am sure many of my former colleagues in corporate venturing might argue that it is not quite that easy to convince their operating company partners that equity with no or soft rights is preferable to a more concrete research and development (R&D) or business development arrangement, but that is a topic for a separate conversation.
The use of corporate venturing becomes far more interesting when we head towards that mystical place known as “white space”.
To read more of this article, log-in for our August issue.