How do you determine if corporate venture capital is right for your startup?
To help you determine if corporate venture capital is right for your startup, we asked startup founders, investors, and business leaders this question for their best pieces of advice. From making sure you have similar goals and expectations to considering the VC’s location, there are several signs to look for that may help you when determining if corporate venture capital is right for your startup.
Here are eight signs to look for when determining if corporate venture capital is right for your startup:
- Be Sure You Have Similar Goals and Expectations
- You Have a Product Used by a Specific Company
- Get an Insider Look at Parent Business
- Ensure Aligned Vision With Key Stakeholders
- Assess Your Company’s Needs
- Assess Sustainability Over the Long Term
- Research The Venture Capitalists’ Names and Reputations
- Consider the Location of the VC Investor
Be Sure You Have Similar Goals and Expectations
The most important thing to look for when determining if corporate venture capital is right for your startup is that the firm you are pitching is actually the best fit for the stage of your business. While it may seem like a good idea to get a big, fancy investor for your startup, the reality is that it can actually be a hindrance to your business if it’s not a good fit.
Large investors are often looking for companies with a large profit margin and a proven track record of success. If you’re looking for a VC who can help you grow and develop your business, you’ll want to be pitching to a firm that has similar goals and interests as you and be reasonably sure that you can comfortably meet their growth and financial expectations.
You Have a Product Used by a Specific Company
There are many different factors to consider when determining whether or not corporate venture capital is right for your startup. One key sign to look for is whether or not you have a product or service that could be used by a specific company. If you have a product or service that would be a good fit for a particular corporation, then pursuing corporate venture capital may be a good option for you.
Corporate venture capitalists are often interested in investing in companies that have products or services that could be used by their own businesses. Therefore, if you have a product or service that would be of interest to a specific corporation, then pursuing corporate venture capital may be a good option for you.
Get an Insider Look at Parent Business
Understanding the relationship between the CVC and its parent business might help you decide if it’s the best option for your startup. Speak with personnel at the parent business to discover more about the CVC’s internal reputation, its connections inside the organization, and the KPIs that the parent has for its venture arm.
Ask questions about how the CVC has been able to communicate its vision internally, the depth of its connections to the various parent divisions, and whether the CVC will be able to provide the internal network with what you require in order to get a sense of the relationship between the CVC and parent firm.
Additionally, you should find out how the parent company evaluates the CVC’s performance and what kinds of reporting and communication are anticipated. All this will help you determine whether the CVC is right for your startup or not.
Ensure Aligned Vision With Key Stakeholders
Make sure your goals and views align with CPC stakeholders. For example, if you want to keep the integrity of your startup – small, innovative, and creative, you need to make this known and be sure key stakeholders are on board.
The last thing you want to do is get in a position where you accept funding, but you no longer have control of your vision.
Assess Your Company’s Needs
There are a few things to keep in mind when determining if corporate venture capital is right for your startup. First, consider your company’s stage of development. If you’re just starting out, it may be difficult to meet the requirements set by corporate venture capitalists. They typically invest in later-stage companies that have already gained some traction. Second, look at the structure of your business. Venture capitalists often prefer companies with a leaner structure and fewer employees. This allows them to have a greater impact on the company’s direction. Venture capitalists usually provide more than just financial support – they can also offer valuable resources and mentorship. If you’re still not sure if corporate venture capital is right for you, consider speaking with a professional advisor.
Assess Sustainability Over the Long Term
In my opinion, for it to be worthwhile from the perspective of an investor, it must be something with longevity. Though not normally from the perspective of a venture capitalist, a short-term project may somehow be viable and profitable. Venture capitalists invest millions of dollars and seek multiple times returns on their investments. Due to this, VCs place a strong emphasis on an idea’s long-term viability. They won’t invest if they don’t think the shelf life is long enough.
Research The Venture Capitalists’ Names and Reputations
I think that each venture capitalist has a unique reputation, which is based on the VC’s experience, skill, and historical results. Future investment rounds are frequently influenced by the name and reputation of a VC and reflect nascent firms. Affiliates with a good reputation will typically add substantive and signifying value to your business. Be mindful of the reputation of any possible partners because it will be linked to your business!
Consider the Location of the VC Investor
One sign that you should target corporate venture capital (VC) investors for your startup is geographical proximity. Investors that are close to your company can provide valuable access to resources and networks, which can be helpful as you scale. Additionally, these investors may be more familiar with your local market, which can give them a better understanding of your business.
I followed this rule and narrowed down my search for VCs within my country – Taiwan. And ultimately I was lucky to find an amazing partner that lived in my city. This close proximity make our interactions frequent and more effective. Therefore, the location of VC is an important consideration when finding the right fit for your startup.