Introducing the Corporate VC Investment Canvas
As described in in my article “A Manual for Corporate Venture Capital” (Download the Manual), it’s elementary to decide before setting up a Corporate Venture Capital (CVC) unit which financial and/or strategic goals you want to pursue with the CVC vehicle. To implement and follow up on the strategy afterwards, however, it’s often not enough to fix the strategic goals for the CVC on a meta-level. As simple as it sounds, before signing a deal, many strategically-oriented CVCs on the market fail to give enough thought to concrete strategic goals that the investment should strive to achieve in order to be aligned with the CVC’s positioning.
Particularly in a corporate environment there’s a lot of talk about synergies which finally never go beyond a theoretical level. CVCs with a strong strategic approach should therefore define concrete strategic and financial goals before each investment. An investment decision should be made on the basis of these goals and the potential connected to them. On top of that, it’s a good idea to decide on a deal-by-deal basis whether a deal is to be considered strategic or financial, or how weighty each of these components is respectively. This will determine the KPIs with which a deal’s success will be measured.
It sounds trivial, but many CVCs also neglect to sufficiently talk to start-ups about the strategic goals the corporate/CVC might have with their investment. Transparent communication right from the start is essential to align both sides’ expectations for working together and to achieve the set goals.
Another point, often lost sight of before a deal is closed, is to outline what advantages the corporate could leverage for the start-up.
To accordingly discipline yourself to clearly define the corporate’s strategic goals and seek potential ways of how the start-up might be able to benefit from the corporate parent ahead of closing a deal, the “Corporate Venture Capital Investment Canvas” (Download as .pptx / Download as .pdf) was developed:
This canvas is meant as a decision template and guide for the definition of strategic investment goals per deal opportunity and their translation into specific measures. This latter aspect is emphasized because experience shows ideas about synergies can only be turned into practice if they’re directly furnished with clear actions. It’s recommended to directly assign those actions to members of the teams in order to be able to track the measures.
Weighting the goals (in the template based on Harvey Balls) helps to derive strategic priorities from the canvas.
The canvas serves as a framework which can be adapted to individual CVC’s requirements.
A barometer indicates the weighting between the strategic and financial goals of the investment.
One can’t expect the same return rate from a highly strategic deal as from a purely financial investment.
So a strategic vs. financial consideration is at the same time a decision about the KPIs that will determine at a later stage whether the deal was successful or not: the achievement of strategic goals vs. financial (exit) returns.
Iskender Dirik is Managing Director at Bauer Venture Partners, the EUR 100m CVC Fund of the Bauer Media Group, Europe’s leading magazine publisher and radio broadcaster.