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Corporate Venture Capital is growing rapidly. It is one of the fastest growing segments in venture capital. According to Pitchbook, corporate venture capital grew from $6.4 Billion in investment financings in 2009 to $38 billion in 2019. Not surprisingly, the number of corporations investing in venture capital has naturally increased as well. According to CB Insights, over 400 corporations invested in venture capital in 2018 up from only 100 in 2013.

Eze Vidra wrote a great post about the Takeover of Corporate Venture Capital where he explained that CVC is not a minority, “[In 2018] CVC activity represented 52% of total investment, exceeding non corporate VC for the first time.” …


An interview with Saleemah Ahamed

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What do venture capital firms Andreessen Horowitz, General Catalyst, Foundry Group, and our company Touchdown Ventures all have in common? All of these venture capital organizations have become Registered Investment Advisers (“RIAs”). Touchdown has been registered as an RIA since the inception of our firm, in 2014.

To explore this growing trend of venture capital firms registering as investment advisers, I sat down with Saleemah Ahamed of Adherence, a company that provides compliance services to investment firms.

Founded in 2011 by Saleemah and Jane Shahmanesh, Adherence provides regulatory compliance management services for asset managers and broker-dealers. Saleemah and Jane are each lawyers who have worked in the financial industry for a long time and wanted to create an efficient, affordable, and effective way to manage compliance for firms with complex or innovative investment strategies. …


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Starting a corporate venture capital (“CVC”) program is a significant undertaking for any organization. Many executives indicate that the reason they are interested in starting a corporate venture capital program is to change the corporate culture as part of a digital or innovation transformation. To achieve culture change, the corporation must be ready both “physically” and mentally. Here are five considerations to help you prepare, before starting a new corporate venture program:

1. Establish Clear Objectives

First, it is important to understand what are you trying to achieve with the new venture program. There are many potential benefits to a corporation in starting a CVC. A CVC program can bring market intelligence, new start-up commercial partnerships and help a corporate launch and grow new businesses. I wrote a blog post on Measuring Success in Corporate Venture Capital providing a framework for how to think about setting and measuring strategic objectives for corporate venture programs. …


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According to a 2017 INSEAD study, the average corporate venture capital program lasts only four years. In their book The Venture Capital Cycle, Paul Gompers and Josh Lerner of Harvard Business School identified three weaknesses to explain why these corporate venture programs fail, including lack of well-defined missions, insufficient corporate commitment, and lack of alignment in compensation schemes.

Based on our collective experience at Touchdown Ventures, where we manage venture capital funds for corporations, we have also identified practical reasons that can cause venture capital programs to fail. Here are our top five:

1. Lack of objectives and overall strategy

As Gompers and Lerner note, it is important to think through the strategy and business plan for the corporate venture program before launching and executing against that plan. I wrote “Measuring Success in Corporate Venture Capital” to discuss how to establish and measure goals. While the financial returns from corporate venture capital can take seven or more years, strategic returns can be realized much sooner if firms have thought through strategy and timing prior to launch. Corporate executives, who tend to focus on short-term progress, typically want to see results sooner than a decade. We have seen examples of well-run corporate venture capital programs realizing strategic returns in the first two years. For example, Bess Chapman of Jet Blue Ventures discusses multiple examples of commercial partnerships between Jet Blue and its portfolio company startups within the first two years of launching the Jet Blue venture program. …


Why corporate venture capital offers an accessible career path

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It is undeniably difficult to get a job in venture capital, since there are only about 13,000 total VC positions (Source: NVCA) in the United States. As Baiyin Zhou of Ascent Venture Partners points out, there are about as many opportunities to be a professional athlete in this country as there are to be a professional venture capitalist.

Brendan Baker, formerly of Greylock and AngelList, says finding a job in venture capital is similar to trying to find an apartment in San Francisco: “It takes longer than you’d expect, feels discouraging as you try, and often happens through personal networks.” In countless books and blogs sharing advice for breaking into the business (like this helpful list of resources from Diversity VC), the discussion focuses on institutional venture capital. But corporate venture capital (“CVC”) may offer an attractive path, too.

CVC is one of the fastest growing parts of the venture capital ecosystem. The segment has been expanding rapidly in recent years, becoming increasingly mainstream as it accounts for a larger proportion of investment activity. As reported in the 2017 PitchBook-NVCA Venture Monitor, CVC firms participated in nearly one-third of all deals in the U.S., and these investments composed a record 44% of total venture deal value. …


How to identify KPIs for strategic investment programs

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Corporate venture capital and institutional venture capital (also known as “financial VC”) are sometimes similar and sometimes very different. Financial VCs largely have one goal: to generate superior financial returns for the fund’s limited partner investors. Corporate venture may have multiple goals: in addition to generating financial returns, “strategic” goals may include helping the corporation learn new industries and market trends, seeking start-ups to fill a product roadmap, or even sourcing commercial partnerships. Of these goals, the simplest to measure is financial return.

Measuring financial return is easy once a fund is complete. One tabulates the capital deployed in an investment or portfolio of investments, and compares it to the money returned on realizing an exit. The raw comparison provides a cash-on-cash multiple on invested capital (referred to as “MOIC”), and when the dates of these cash flows are included, an internal rate of return (“IRR”) calculation is generated. …


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If you want to learn how to be a venture capitalist, our industry offers a lot of great mentors, including experienced and wise luminaries like Fred Wilson, Bill Gurley, Mark Andreesen, Mark Suster, John Doerr, and Groucho Marx. Wait, what? Yes, Groucho Marx, the old school comedian.

Groucho Marx, whose real name was Julius Henry, is a famous American comedian, and actor who starred in dozens of radio, TV, motion pictures and Broadway shows. Groucho is also known for authoring many clever quotes that can teach young professionals basic venture capital lessons. Here are some examples.


What College Football Can Teach us About Corporate Venture Capital

Co-authored with Eric Budin (with contributions from Scott Lenet)

Anyone who knows us even a little bit knows that we are huge Michigan football fans. We know way too much about their third string linemen, we spend an inordinate amount of time on recruiting blogs, and we even scheduled our respective wedding dates to avoid football season. Somehow, our wives married us anyway.

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After almost a decade of Michigan football that would be charitably described as mediocre, we were more than a little bit excited when Jim Harbaugh joined as head coach last year. …

About

David Horowitz

Founder & CEO at Touchdown Ventures (manager of corporate venture capital funds)

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