Speaking at the Global Corporate Venturing Symposium, Mark Wilson, principal at commercialisation consultancy Strategic Technology Bioconsulting, told attendees that corporate venturing capitalists are increasingly adopting hybrid fund models.
Wilson moderated a panel discussing hybrid forms of corporate venturing that mix direct and indirect investing, and described the hybrid model as something that‘blends elements of two different structures into the same environment.
The approach has traditionally been used by government bodies to engage with independent venture capital firms, but he noted there is a trend in the CVC space for this kind of model.
This structure is particularly emerging in the pharmaceutical and biotech spaces where large pharmaceutical companies are engaging with independent VC groups above and beyond their own venturing activities.
Wilson said: “In many of these structures experimentation seems to be the dominant design and is used to bring together a vision of finance and decision making.”
Shiva Dustdar, head of innovation finance advisory at European Investment Bank (EIB), suggested that one of the key points for the future was how corporate venture capital units and angel investors can come into these hybrid structures.
Dustdar noted that the EIB is looking to help support the development of a European microprocessing entity that is capable of providing competition to similar businesses in China and the US. To help, EIB is looking at ways to bring in capital and advisors to help the project.
Peter Cowley, president of European Business Angel Network, had previously set up a small corporate venturing unit for an engineering company called Marshall.
Hybrid models have been around for very many years, though not necessarily directly at the corporate level, even if VC firms have angels as limited partners, working together to support deals and make decisions.
Looking from the outside, Cowley said the biggest challenge or issue in the space is alignment and questioned what would be the correct approach when setting up good practices in the hybrid mode from a CVC vehicle’s point of view.
Cowley added: “My main concern is there will be a misunderstanding between the parties, like any relationship. Whether it is a marriage or joint venture, there will always be a misunderstanding at some point during the process.”
Wilson agreed, saying: “You are bringing different types of organisations together so that does bring with it challenges. However, it is important to note that this is not replacing the standard corporate venturing, but it almost appears to be a new form of research and development or extramural exploration.”