Navigating Success: Actionable Strategies for Effective Corporate-Portfolio Partnership

By Geetha Dholakia — Portfolio Program Manager at TDK Ventures

In the previous article “Unlocking Equal-Win Synergies: Best Practices in Navigating Corporate-Portfolio Engagements in the World of CVC”, I shared thoughts on how to ensure successful strategic alignment between corporate parent and portfolio companies over the course of a CVC investment, particularly within the context of CVC investments in early-stage hard-tech startups. The aim is to empower CVCs to effectively navigate and advance portfolio-mothership engagements towards tangible projects that have the potential to yield first-to-market products.

In this article, I offer actionable insights drawn from my tenure as a Portfolio Program Manager at TDK Ventures. I delve into the intricacies of nurturing impactful collaborations between corporations and portfolio companies, emphasizing six effective strategies for success that I have found valuable, while also pinpointing common pitfalls and nuances to navigate them for optimal results.

Strategic Synchronization: The ‘Engagement Team’ tasked with fostering parent-portfolio engagements in a CVC is in a unique position, in that their main role is one of a ‘facilitator’ of the engagements. This requires the team to align with both the portfolio and the parent, at the very outset, to understand perspectives of each side and what they see as anticipated benefits of a mutual engagement. These expectations could be outlined by the CVC, as part of the broader investment proposal, encompassing both potential short and long-term strategic benefits.

After investing in the startup, the company becomes the CVC’s “portfolio company”. At this stage, the Engagement Team plays a pivotal role as facilitators, bringing together the relevant parent business groups and the portfolio. A streamlined approach to uncovering potential partnerships and avenues for learning between the two entities involves facilitating an introductory meeting. This meeting would ideally involve key members from the new portfolio teams, including the CEO and CTO, as well as representatives from teams within the parent business groups who express interest in collaboration.

For exploratory discussions between the teams to transition into tangible projects such as joint development agreements (JDAs), pilots, licensing, non-recurring engineering projects (NRE), and ultimately first-to-market products, the single most important factor is motivation and initiative, from both portfolio company and parent business groups. Both the portfolio company and the parent business groups must be enthusiastic and proactive. The second most important factor is the ability to engage at the right time, with a convergence of product roadmaps. The portfolio has its own product development roadmap and so do the parent business groups. These timelines have to align and then converge for fostering co-development synergies. Whether it is joint product development or design-in at the crucial stage of a reference design, where pivotal design decisions are made, synchronization of timelines is critical.

It’s imperative for the CVC team to understand the roadmap of the portfolio by periodic discussions with its key team members. Similarly, discussions with the parent corporation’s R&D teams, strategic account managers and sales teams will help in understanding the mothership’s roadmap and pain points. The CVC teams will have to periodically check in with both parties to ascertain the potential to engage in deeper collaboration and effectively communicate it to both parties.

Setting Expectations: Prior to joining TDK Ventures, I supported NASA’s $200M Small Business Innovative Research (SBIR) program in technical program management. CVC investments in early-stage, hard-tech startups share many similarities to NASA and other federal SBIR programs. The US SBIR program aims to stimulate technological innovation and increase private sector commercialization of these innovations developed through federal R&D funding. Some parallels are that both prioritize early-stage, hard-tech startups with a potential for commercialization, many of which have high technical risk, long development cycles and need continued funding and support through growth and scaling phase. A significant difference is that the SBIR program operates through grants, with startups submitting proposals in response to grant calls. In contrast, for CVC investments, fostering technical and business engagements with the parent company requires nurturing, without predefined guidance on the ultimate outcome.

Clear and transparent communication is essential for nurturing engagements, especially in the absence of predefined guidance. Establishing clear expectations from the outset is key to fostering a fruitful partnership. It’s crucial to communicate these engagement expectations clearly to the portfolio and the parent, to ensure they understand what each is seeking, whether it’s knowledge sharing, collaborative product development leveraging combined resources and expertise, research and development, or acquiring/deploying a specific solution. When everyone is aligned on overarching goals and areas of mutual interest, achievable targets and potential pathways to achieve it, it fosters open communication and meaningful synergy between both parties. For the CVC engagement team, achieving this alignment may require multiple iterative discussions, with both the portfolio and the parent, throughout the engagement process.

As collaborations progress, roadblocks such as development challenges or fundraising priorities for the portfolio may arise. It’s important to give portfolios space when they’re busy with fundraising or other critical project deadlines, while also informing the parent about potential delays in engagement. Clear communication with all stakeholders ensures alignment and transparency. Throughout my experience enabling and managing engagements between the portfolio companies TDK Ventures has invested in and the parent TDK, I’ve witnessed firsthand how crucial this is on multiple fronts.

Shared Learnings: CVCs enable the delivery of deep insights to both parent and portfolio companies through the engagements on tangible projects and shared conversations. The parent corporation brings expertise in mainstream applications, extensive customer networks, and experience in large-scale manufacturing. Their sales teams, well-connected to established market players, offer startups insights into market trends. Conversely, portfolios offer the parent insights into emerging technologies and disruptive solutions that could shape the future market landscape. The symbiotic relationship between these two entities has the power to drive significant progress, moving the needle for both the entrepreneurs and the parent company. While facilitating these discussions, the CVC team must maintain a strict firewall between the portfolio and the parent business groups to prevent the exchange of confidential information of either party.

Bringing together our portfolios in a ‘Portfolio Summit’, where they can network in person, brainstorm and interact with each other and with the senior corporate leadership and key experts from parent business groups. This has led to numerous shared insights, serendipitous kindling of synergies with the parent, and also inter-portfolio synergies. CVC engagement team can enable such platforms that offer valuable opportunities for engagement, providing touchpoints for collaboration and knowledge sharing. Initiation of engagement can happen in many ways, through the CVC team, insights from the parent or the portfolio. Another opportunity to enhance synergies is to facilitate visits for members of the parent business to the portfolio companies, and vice versa.

Shared learnings need not be confined solely to enabling interactions between mothership and portfolios. Engaging with counterparts from other CVCs within the same technology sector, as well as across different sectors, can also yield significant insights. This exchange of notes and best practices can take various forms, including one-on-one discussions, reciprocal visits, or panel discussions where each CVC shares its unique approach and experiences.

Serendipity: An element of serendipitous discovery can be very beneficial for kindling the organic blossoming of collaborative ideas. For example, during meetings, particularly remote ones, it’s beneficial to allow plenty of room for free-flowing discussion and to let conversations unfold naturally. Even if meetings are agenda driven, some space should be set aside for open discussions. For ‘Introductory Meetings,’ where the new portfolio team is introduced to the corporate business groups, if the right expectations are already laid and relevance already ensured pre-investment, natural conversations are most likely to lead to the best engagements, and they will be ones that the individual contributors themselves are already motivated to make happen. Indeed, we were pleasantly surprised by the numerous serendipitous synergies that emerged during the in-person networking facilitated by the Portfolio Summit, both between parent and portfolio as well as cross-portfolio, that even the engagement team couldn’t have anticipated beforehand.

Scaling Phase: As the tangible engagements such as JDAs and pilots mature over time, they may require increased budget allocations. If these budgets are assigned by the parent business groups, the CVC teams must be cognizant of the parent company’s annual financial cycles. This becomes particularly relevant in cases where there’s a need for budget adjustments mid-financial year. Implementing strategies to access a funding pool in the parent, such as the ‘Innovation Grant’, can facilitate the continuity of projects without interruption.

Moreover, as the engagements progress, portfolio companies can benefit immensely from the support that can be provided by the parent to scale, including access to the parent’s customer networks and ecosystem assistance. CVCs can initiate an open dialogue regarding strategic growth areas with the parent, if appropriate, and if it can bring equal-win opportunities such as M&A.

Surprise: To ensure the success of any engagement, it is essential to remain flexible and responsive to unexpected developments. This is particularly true for structure and timelines in technology development for early-stage, hard-tech startups. Innovation here often revolves around the quest to bring first-to-market products or pioneer entirely new market segments and disrupt status-quo. However, the journey to a create first-to-market product is rarely straightforward and the innovation process here is akin to research and development. Portfolio companies can encounter hurdles and challenges along the way, leading to the need for strategic pivots of business model or product in response to market feedback, changing economic circumstances, or new opportunities, which can impact on-going collaborations with the mothership. Occasionally, jointly agreed development with the parent corporation may encounter technical challenges, necessitating a pivot. It is even possible for the mothership to pivot their strategy and this too can impact JDAs and their outcomes. Identifying internal champions within the parent business groups who possess a deep understanding of the complexities of startup journey and excel at navigating complex scenarios and advocate for the portfolio, enabling them to overcome challenges, can prove immensely valuable.

In the face of such unexpected developments, the engagement team, acting as the bridge between the portfolio and the parent, must pro-actively enable diplomatic communication and navigate to establish clear expectations to chart the next agreed-upon course of action, such as a re-assignment of milestones. Even if the optimal course of action involves pausing or discontinuing the engagement, clear communication is essential to ensure that both parties understand the rationale.

Unlocking Success: Tried and True Best Practices in Action

I leave you with some guiding pointers from the insights shared in this article.

The Goal: Be clear and focused on what the goal of the CVC is.

· Enable mutually beneficial equal-win partnerships with the parent and portfolio.

· Deliver deep insights to both parent and portfolios, through the engagements.

· Move the needle, both for entrepreneurs and for the parent.

A Successful Engagement Needs:

· Motivation & Initiative — from both portfolio companies and parent business groups.

· Right timing and convergence of product roadmaps.

· Opportunities and touchpoints for creativity and innovation to flourish through engagement networking enabled by Portfolio Summits, portfolio visits by parent business groups and vice versa.

· Internal champions in the parent business groups.

· Catalysts for synergy ideas- they can come from various sources, including CVC teams, portfolio companies, or parent corporations.

· Clear communication and shared expectations.

Be cognizant of:

· Delays due to technical challenges in innovating first-to-market products.

· Delays due to portfolio fundraising priorities and customer commitments.

· Pivots — by both portfolio companies and parent.

Project Management:

· Introductory Meetings to onboard new portfolios with relevant parent business groups.

· Adapt to diverse communication styles, and cultures of the organizations involved.

· Track progress of engagements.

· Be patient.

In essence, strategic alignment, preparedness, and adaptability form the foundation for enabling successful Corporate Venture Capital (CVC) engagements. By identifying opportunities, nurturing relationships, and fostering organic growth, CVC engagement teams serve as catalysts for innovation, bridging the divide between established corporations and agile startups to cultivate an environment where disruptive ideas can thrive and drive industry advancement.