An anonymous survey by the Venture Connectivity Club, which represents all constituents of an innovation ecosystem, including entrepreneurs, corporate venturers, angels, venture capital firms (VCs), universities, governments and services providers, showed the poor image held of corporate venturing during the first dot.com bubble and its implosion at the turn of the millennium has been broadly turned round.
The industry has shaken off most concerns about whether they will be long-term investors, according to the snapshot poll held during and after one of the club meetings of 120 people, which was split equally between entrepreneurs, corporations and other investor types.
As one entrepreneur said: "Corporate venture units offer huge benefits in that they represent not just investment capital but assistance in selling into their corporation and shortening the sales cycle. Revenues from the venture unit’s parent company stabilise an early-stage company and reduce the investment risk."
Other advantages to corporate venturing units lay in their product, manufacturing and marketing insights, while strategic relationships could help them to have "a more rounded view of the potential benefits other than a direct financial reward".
Entrepreneurs and other investors said broadly the same things, that corporate venturing units would be welcome in syndicates if they remained democratic rather than autocratic and "only if value brought extends beyond capital" and helped lead to better exit valuations.
However, those surveyed said the concerns were about perceived "conflicts of interest" between corporate venturing groups and the parent behind them and the ambitions of the entrepreneurs and other investors. These "different motivations" could lead them to use intellectual property for their own benefit and compromise exits or relegate a portfolio company to the "also ran" bench.
Corporate venturing units, by turn, said they were open parties, although there was a strong preference towards VCs in their answers.
They were also aware of the perceived concerns. As one said: "They assume we cap the upside, get an unfair advantage in acquisition discussions, limit their options. Once they have actually worked with us they are less timid."
The corporate venturing units also said they had come across worries about their "long-term commitment to funding and supporting the start-up" and "not [being] in it for the returns, which is not true".
Instead corporate venturing units said they brought, as one said, a "different time horizon, access to customers, knowledge and help from industry leaders".
This time horizon is especially important at earlier stages or in areas where VCs are struggling. One universitybacked VC said most VCs wanted portfolio companies with $4m to $5m in revenues and which avoided perceived "difficult" areas, such as automotive parts. But with industry interest, the VC said an entrepreneur could find backing from a corporate venturer as long as the syndicate had the same attitude as the portfolio company.