Marcus Venture Consulting: Corporate Venturing

It is a time of great potential for corporate venturing, when companies with a clear mandate, stability, and the potential for growth, and some cash in hand, can pick amongst potential investees, both great and small, that fit their mandate. These investments are designed with any number of goals in mind, be it to help expand their own reach, to shore up their future for possible directions of growth in their own industries, or simply to make a good investment. The current market also provides an unprecedented opportunity for entrepreneurial ventures to approach companies with deep pockets, a wealth of industry knowledge, a network of useful contacts, and good old-fashioned business acumen.

Marcus Venture Consulting is an outside experienced advisor taking a cold hard look at venturing plans to ensure that they are measuring up to internal standards and needs as well as ensuring that our clients are leading the way in best practices in venturing.

As advisors to companies during both the strategy and architecting stages as well as the reassessment and reconfiguring phases, we've been able to see the best practices and some of the common mistakes in practice. When the corporate venturing unit is set up right and maintained or tuned to make it run well, it can make a great contribution to both companies and investees alike, providing a strong return on investments, loyal partners, distribution channels, and technological and market advantages for all parties. If not attended to properly, and vigilantly monitored and reviewed, it can turn into a black hole which can pointlessly consume a great deal of money, and sour the good will and good temper of many people in a company leading to discontent on the board and with shareholders of all ventures concerned and making it the object of industry cynicism.

We work with our corporate venturing clients to:

1) Create investment strategies:

Determine whether a venturing effort is practical, suitable, and constructive for the company
Researching and designing investment profiles
Developing clear investment criteria
Presenting potential areas of activity that match the profile
Defining investment options and vehicles, including direct investment and funds
Determining timeline for investments

2) Create and implement a decisive plan to bring proposed course of action to fruition:

Introducing the client to the appropriate potential opportunities for investment
Introducing the client to potential partners, syndicate candidates
Helping the client to establish credibility in the venture and target sector community on a global basis
Carrying out due diligence of potential investment partners
Helping clients to structure deals for investment

Thinking through best practices in corporate venturing

It starts at the most notional stages. How the initiative was acted upon makes a big difference to its long term success and many of the foundations for failure or false starts lie in the time when the fund/unit was set up.

A critical decision was made to either give it serious attention, hiring someone with venture experience, including finance and negotiation and management skills, or to hand the project to a bright young spark who perhaps wasn’t terribly expensive and was expected to be more of an administrator.

Developing a clear investor’s mandate:

to find businesses into which they can invest and potentially buy;
to seek out enterprises that support the growth/proliferation of their own platform;
to look for companies that offer tools that can fill in the gaps of their offering with whom they can partner and into whom they can invest;
to find companies that may be working in the cutting edge of the same sector so whichever way the sector turns the investor has a head start;
to look for businesses with good and competent management teams who will provide a good return on the money invested when the exit comes around.

Without a clear mandate, the alternative scenario, is the “come one come all” method where plans come in by the hundreds because word on the street is that the company has money, and the result is that many hours are spent pouring over the plans to see if a common theme appears.

No matter how a company goes into corporate venture funding, one major part of successfully implementing the funding strategy is ensuring effective internal communication and avoiding a common pitfall of internal politics. By their very nature, the investments will cut across multiple disciplines or units of large organizations, where they can potentially add a great deal, but can also be seen as a threat or a distraction. Managing this internal communications process is essential to the success and well being of the corporate venturing effort and to the ability of the organization to help its investee companies.

Some corporate efforts are ad hoc, some are set up as internal business development units, and others are created as separate external funds.

One thing that has proven helpful is the addition of an external person on the investment committee. This person can have a well-grounded view of the market and the landscape both inside and outside the company. It should be someone who is not caught up with any internal wrangling and yet is sensitive and well aware of corporate goals and has a clear understanding of the mandate.

Done well, corporate venturing can achieve a great deal, but lack of experience and knowledge, lack of a clear mandate, and a false sense of security can make it virtually impossible for these ventures to be a useful addition to the business.

To contact Marcus Venture Consulting email us at information@marcusventures.com

Also, we welcome your comments, suggestions, and queries about building and maintaining robust and successful corporate venturing efforts...