Corporate Venturing Scheme (CVS)

Corporate Venturing Scheme (CVS) is an initiative where large corporations invest in small start-ups or emerging firms. This strategy helps established companies gain innovative capabilities while providing financial and strategic support to the emerging enterprises.
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What is Corporate Venturing Scheme (CVS)?

The Corporate Venturing Scheme (CVS) is a strategic initiative whereby large corporations invest in small start-ups or emerging companies. This investment strategy allows established firms to leverage innovative technologies, new market opportunities, and external innovation that originates from smaller, agile companies.

Key Features of CVS

  1. Strategic Partnerships: Companies form strategic alliances with start-ups to gain access to innovative solutions relevant to their industries.
  2. Equity Investment: Corporations provide capital to start-ups in exchange for equity stakes, ensuring they share in the success of the emerging business.
  3. Mentorship and Resources: Large companies often provide mentorship, industry expertise, access to networks, and other resources to fuel start-up growth.
  4. Innovation Adaptation: Established businesses integrate innovative solutions developed by start-ups into their operations to enhance their competitiveness and market position.
  5. Risk Management: CVS allows companies to explore new markets and technologies with relatively lower risk compared to pursuing innovation in-house.

Examples of CVS

  1. Google Ventures: Google invests in innovative tech start-ups like Uber and Nest through its venture capital arm, Google Ventures.
  2. Intel Capital: Intel’s venture capital subsidiary, Intel Capital, funds start-ups in the semiconductor and technology spaces like VMWare and Red Hat.
  3. Johnson & Johnson Development Corporation (JJDC): JJDC invests in early-stage biotech, pharmaceutical, and medical device companies to drive innovation in healthcare.

Frequently Asked Questions (FAQs)

Q1: How does a company decide which start-ups to invest in under CVS?

  • Companies usually look for alignment with their strategic objectives, market potential, the innovative capacity of the start-up, and the strategic fit with existing capabilities.

Q2: What are the benefits of CVS for start-ups?

  • Access to funding, mentorship, resources, industry expertise, and enhanced credibility from association with a well-established corporation.

Q3: Is CVS high-risk for large corporations?

  • While there’s inherent risk in investing in new ventures, CVS mitigates it by diversifying investments across multiple start-ups and leveraging shared expertise.

Q4: How does CVS differ from traditional venture capital?

  • CVS is driven more by strategic value and synergies with corporate goals than by mere financial returns, which is often the primary motivator of traditional venture capital.

Q5: Can start-ups benefit without giving up too much control?

  • Typically, start-ups negotiate terms to secure investment while maintaining substantial control over operations and strategic decisions. It’s a delicate balance.
  1. Corporate Venture Capital (CVC): Capital invested by large companies in start-ups and small businesses that show potential for high growth.
  2. Strategic Investment: Investments made by firms to gain competitive advantages, such as access to new technologies or entry into new markets.
  3. Innovation Ecosystem: Networked environment where businesses, institutions, and individuals interact to drive innovation and technological advancement.
  4. Equity Financing: The process of raising capital through the sale of shares in an enterprise to investors.

References and Further Reading

  1. Harvard Business Review: The Rise of Corporate Venture Capital
  2. MIT Sloan Management Review: How Corporate Venture Capital Helps Firms Explore New Industries
  3. Forbes: Corporate Venturing Is Here To Stay

Suggested Books

  1. “Corporate Venturing: Accelerate Growth Through Collaboration with Startups” by Tom Cannon
  2. “Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist” by Brad Feld and Jason Mendelson
  3. “The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses” by Eric Ries

Accounting Basics: “Corporate Venturing Scheme” Fundamentals Quiz

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Corporate Venturing Scheme (CVS)