How CVC's Are Shaping the Future of Start-ups
The strategic objective of a corporate venture capital is to empower a start-up with resources and marketing expertise required for a new venture to build an enterprise.
To set up a new venture, an entrepreneur not only needs financial support, but also needs proper infrastructure, access to market and customers and a good mentor. Here comes the role of a corporate venture arm that along with financial support provides industry experts and advisors to elevate the entire start-ups ecosystem.
How Does Corporate Venture Capital (CVC) Model Work?
A firm invests in start-ups through its corporate venture capital. The strategic objective of a corporate venture capital is to empower a start-up with resources and marketing expertise required for a new venture to build an enterprise. The corporate house through CVC basically plays the role of a strategic investor as it holds minority stake in the company as compared to Venture Capitalist who holds majority stake.
Mukund Mohan, Director, Microsoft Ventures, says, “The model of CVC mostly focuses on investing in a company to help its products and platform to expand beyond the current state. The main aim of CVC is to explore new markets, technologies, new business models and also to make money.”
CVC’s Value Propositions
Apart from financial support, corporate venture capitalists allow start-ups to avail other valuable resources required to enhance the business. The key objective of a corporate venture capitalist is to inetarct with entreprenuers and figure out their needs and interests. Moreover, they help start ups identify the key growth opportunities lying in the market which can build the pillars of a new venture.
Over the last two decades, more firms are interested in venturing into funding the start-ups. Moreover, there is a large untapped market which the big firms are aggressively eyeing as innovation does not always occur by investing in R&D, it can come from investing in start-ups and small projects. “In India, we can see rise in the number of companies allotting funds that will be used as part of their VC engagements,” elucidates Tagare.
Wipro is one of the biggest examples to give the overview of the trends of CVC in India. Recently, the company announced to set up a corporate venture arm that would initially invest up to $100 million in start-ups. Moreover, Infosys’ new CEO Vishal Sikka expressed interest to establish corporate venture arm.
Qualcomm, a global chipmaker, has also invested in home healthcare company, Portea Medical. “In the middle of the last decade, there was a lull, now again corporate venture funds are becoming active. Portea is happy to partner with Qualcomm. It is not only about capital, but added value of exposure to other technologies that Qualcomm has. It is something more than just financial help,” says K Ganesh, Chairman and Co-founder, Portea Medical.
Incubation Today start-ups need something beyond capital like industry access, market know-how, supply chain management and distribution ecosystem more.
Microsoft Ventures through their accelerator programme provides start-ups with all vital infrastructure support, tools, free credits, training programmes on Win8 & Azure platforms. Furthermore, Microsoft Ventures has a strong network of successful entrepreneurs, industry experts and advisors who advise the start-up on a wide range of issues – technology, go-to-market, marketing and fund raising plans.
Illustrating about the accelerator programmes for start-ups, Mohan says, “The accelerator programme runs various partner meets and events where potential customers and partners are invited to talk to start-up teams. Overall, it is a comprehensive programme to help an entrepreneur achieve his/her goals rapidly.”
Adsparx is one of the start-ups incubated by Microsoft Ventures’ accelerator programme. Kunal Langwakar, CEO, Adsparx, says, “MS Ventures programme runs a customer development workshop that provides great insight into customer acquisition techniques, pitches and presentations. Weekly meetings are held with accelerator team to assist the start-up in identifying goals, weak areas and carving out strategies.”
If one goes back to the history of start-up industry in India, the innovations of start-ups had helped many companies to add value to their businesses. So far, Intel Capital has invested more than $330 million in more than 100 companies across 10 cities in India.
Perpetuuiti and Vizury Interactive are two Indian start-ups that were financially backed by Intel Capital. “The Intel Capital team with their deep domain expertise and resources is helping us to identify target markets and add value to the business to scale rapidly,” says Rohil Sharma, CEO, Perpetuuiti.On the same note, Chetan Kulkarni, Co-founder and CEO, Vizury Interactive, says, “Intel Capital has helped us in forming long-term strategy and in tweaking short-term execution plans.”
As per Tagare, “We focus on helping entrepreneurs scale from start-up to global corporation through our tech expertise, brand capital and the access to our global network. Our business development programmes help Intel Capital entrepreneurs attain success in the technology ecosystem.”
The norms that a corporate venture arm follow while investing in start-ups are almost similar to that of typical venture capitalists. The criteria include quality of the entrepreneur, market condition, possibility of creating and developing a valuable company.
Unlike venture capital or private equity firms whose key motive is to earn attractive return on investment, corporate venture capitalists are less concerned about the financial returns. They intend to focus more on building strategic relation with entrepreneurial venture community. With the start-up ecosystem gaining ground in India, good opportunities are expected to come for corporate venture capitalists in the future. Moreover, corporate venture capitalists invest across the broad spectrum of start-ups irrespective of size to encourage the youth of India to become successful entrepreneurs of tomorrow.