Corporate venture capital has begun to garner more and more headlines in recent years, as an increasing number of companies commit to venture investing for the long term. Across industries, we observe a surge in companies as diverse as ABB, BMW, Google, or Tencent committing to venture investing for the long term, to complement, rather than substitute, existing innovation and growth activities. But how do companies effectively organise for venturing? What is the path to success to establish a new corporate venturing program? In this study, which has been recently published by the European Financial Review, our research indicates four steps that are consistently applied to make corporate venturing work.

1. www.europeanfinancialreview.com 31
Corporate venturing has begun to garner
more and more headlines in recent years,
as an increasing number of companies
commit to venture investing for the long
term. Below, Boris Battistini, Fredrik
Hacklin, and Pius Baschera discuss four
steps that are consistently applied to
make corporate venturing work.
C
orporate venturing has begun
to garner more and more
headlines in recent years, and
this trend looks set to continue. Across
industries, we observe an increasing
number of companies as diverse as ABB,
BMW, Google, or Tencent committing
to venture investing for the long term, to
complement, rather than substitute, ex-
isting innovation and growth activities.
In the last year alone,1
more than 550
corporate venturing units from around
the world participated in about 1,100
deals, for a total size of funding rounds
of more than $19 billion. The exit pipe
is opening strongly, particularly in the
U.S., as public markets roar back to life.
However, such headlines are the
mere tip of the iceberg. Once a rela-
tively low-profile activity, corporate
venturing has moved into a signifi-
cant position, playing an increasingly
prominent role in the venture capital
market. It has quickly assumed more
importance as a strategy to increase in-
novation returns, identifying and cap-
turing the strategic value of emerging
technologies, business models, and en-
trepreneurial ventures.
But how do companies effectively or-
ganise for venturing? What is the path to
success to establish a new corporate ven-
turing program? To address these ques-
tions, we conducted a multi-phase global
study of 48 high-profile venture units at
leading international corporations in the
Forbes Global 2000, in collaboration
with Bain & Company2
. Based on this
study, our research indicates four steps
that are consistently applied to make
corporate venturing work.
1. Evaluate the case for corporate
venturing. Corporate venturing can be
a highly effective approach to increase
awareness of and gain access to leading-
edge technologies and business models
of strategic interest. Through providing
an effective early warning of develop-
ments in various sectors, corporate ven-
turing activities can accelerate the pace
of innovation. However, a company
must carefully consider if corporate ven-
turing appropriately addresses the chal-
lenges it faces. Example questions (see
Exhibit 1) to ask include: “Do we need
to go outside to complement our inter-
nal growth efforts?” and “Do we lack a
thorough understanding of business dy-
namics in adjacencies that might pose
an opportunity or a threat?” Further,
the company must assess whether the
state of the core business can benefit
from corporate venturing activities.
That entails defining the relationship
to the core business and examining the
related opportunities and threats.
2. Choose objectives and setup.
When establishing a corporate ventur-
ing program, it is critical to define the
strategic mandate and then select spe-
cific objectives to address the challenges
Exhibit 1.
Is corporate venturing the right choice for you?
Corporate venturing is not the solution to all innovation challenges in your company. However, if the criteria below
apply to your case, a corporate venture unit is worth considering.
Do we lack a window on new developments in our business space?
Do we need to go outside to complement our internal growth efforts?
Is there a gap between internal R&D (BU-focused) and overall corporate growth objectives?
Do we think the industry/technology landscape will change significantly in
the future and it will be useful to make some strategic bets to position us for change?
Do we lack a thorough understanding of business dynamics in adjacencies
that might pose an opportunity or a threat?
Are there corporate assets that could be leveraged to other markets using external
ventures?
Are there ideas internally that do not get escalated?
Source: Corporate Venturing Research Initiative (ETH Zurich / Bain & Company)
Organising for Corporate Venturing
By Boris Battistini, Fredrik Hacklin, and Pius Baschera
Strategy
faced. While a variety of approaches
can be adopted for venture invest-
ing, ranging from a strategic focus to
a largely return-based orientation, a
strong and well-defined mandate to cor-
porate venture units from the executive
team and board of directors ensures
faster decisions, consistency of ap-
proach, and follow-through on commit-
ments on behalf of the corporate parent
towards co-investors and ventures. A
strategic mandate and objectives must
be cascaded into a compatible organ-
isational setup. All along the spectrum,
from strategic to financial objectives,
there must be reinforcement in support
of the guiding principles, management
practices, and performance measures to
ensure success.
3. Define investment strategy and
maintain discipline. In order to ensure
strategic relevance, it is necessary to
define clear investment criteria with
regard to the venture unit’s chosen
objectives. Our research indicates that
multiple investment objectives are
increasingly adopted and financial
returns are considered essential to the
long-term suitability of their activities
— both internally to ensure the support
of the corporate parent and externally
to secure legitimacy in the venture
capital community and to access
Management

2. 32 The European Financial Review June - July 2014
high-volume, high-quality deal flow.
Once the investment criteria are delin-
eated, performance and management–
related target values must be defined.
It is equally important that these crite-
ria and thresholds are not whimsically
abandoned as time goes on. The invest-
ment criteria and performance metrics
are central to improve clarity on goals
and alignment with the strategic objec-
tive of the venturing initiative. The
venture unit must evaluate potential
investments consistently and ensure
that follow-on investments continue
to adhere to set investment criteria.
This helps balance the return-based
orientation of investors and the de-
velopment gains of portfolio startups,
on the one hand, with the innovation
and growth targets of the corporate
parent, on the other.
4. Review and adapt. Rarely do
things remain constant, especially in
the high-tech space in which many
corporate venture units operate.
Therefore, venture units must allow
for changes in the fundamentals if
challenges to be addressed evolve over
time. However, it is important that
once it has been decided to adapt a
corporate venturing approach, the
changes must be carried out system-
atically, repeating the preceding steps
and ensuring the rigorous application
of the lessons learnt, rather than on a
piecemeal basis (see Exhibit 2).
Caveats for Managers
Corporate venturing can indisputably
be a powerful tool to achieve a variety
of strategic and financial objectives, but
it is not always the most appropriate
tool, and considerable challenges stand
in the way of success. When seeking
a growth engine, a number of alterna-
tives must be considered in concert.
Traditional research and development,
open platform innovation, M&As, and
alliances are a few tools that may be
more appropriate or have higher prob-
abilities of success in certain scenari-
os. Likewise, different industries and
technological sectors may lend them-
selves to one tool more than another.
Corporate venturing requires long-term
company support, rather than just the
buy-in of an executive champion. The
timeline to reap success from a corpo-
rate venturing program is longer than
the tenure of many executives. This
‘timing mismatch’ is one major chal-
lenge to reaping success from corpo-
rate venturing. The revolving doors of
executive suites may lead to changes
in commitment to a corporate venture
unit. Another key challenge is main-
taining discipline to delineated objec-
tives and corresponding investment cri-
teria over a prolonged period of time.
Corporations tend to have less experi-
ence in this realm than independent
venture capital funds.
However, all is not lost. After some
50 years of corporate venturing history,
there is more experience than ever before
in doing things properly. The four steps
recommended to increase the probabil-
ity of success of a corporate venturing
program draw on this cumulative wealth
of experience. The economic cycle may
ebb and flow, but today, more than ever
before, the success of corporate venturing
lies within every manager’s reach.
We are grateful to Alexander Pertot, Thomas
Lustgarten, and Rebecca Altmann from Bain &
Company for their support and participation in
the Corporate Venturing Research Initiative. We
would also like to thank the Swiss Commission
for Technology and Innovation for the financial
support (CTI grant 13872.1).
About the Authors
Boris Battistini is a Senior Research
Fellow at ETH Zurich and Project
Leader of the Corporate Venturing
Research Initiative with Bain &
Company. His research interests are in
venture capital, innovation and entre-
preneurship and his work his work has
appeared in journals such as MIT Sloan
Management Review, Long Range Planning
and Nature Biotechnology.
Fredrik Hacklin is an Assistant
Professor of Entrepreneurship at ETH
Zurich and Head of the Corporate
Innovation Lab. He is the author of
the book Management of convergence in
innovation. His research interests are
in corporate innovation and strategic
entrepreneurship.
Pius Baschera is the Chairman of
the Board at Hilti Corporation, where
he previously served as Chief Executive
Officer. He is currently Professor of
Entrepreneurship at ETH Zurich, and
board member at Roche and Schindler,
among others. His research interests
are on corporate renewal and business
model innovation.
References
1. According to the specialised data provid-
ed by Global Corporate Venturing.
2. B. Battistini, F. Hacklin, P. Baschera.
(2013) The state of corporate venturing:
Insights from a global study. Research-
Technology Management, Volume 56, Number
1, January-February 2013, pp. 31-39(9)
Build and evaluate
case for CV
Choose objectives
and set-up
Define strategy and
maintain discipline
Exhibit 2.
Four steps to set up corporate venturing
Setting up your corporate venturing activities needs to follow a stringent and goal-oriented process. In four
steps, you can replicate what successful players in the industry have done and learned in the past.
Check if challenges faced are
appropriately addressed by
CorporateVenturing
Assess if state of core
business allows it to benefit
from CV activities.
Decide on strategic mandate
and choose objective to
address challenges faced
Translate mandate and objectives
into profound oraganizational
set-up supporting CV rationale
Define investment space
Develop means that assess if
investments fit into chosen space
Going forward, ensure that
all investment are locate in
chosen space
Review and adapt consistently
Allow for changes in CV set-up if challenges to be addressed change
As experince is gained, CV activities can have broader boundries
Change CV set-up holistically and consistently throughout preceding steps
Source: Corporate Venturing Research Initiative (ETH Zurich / Bain & Company)
1 2 3
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Management