Unlocking Equal-Win Synergies: Best Practices in Navigating Corporate-Portfolio Engagements in the World of CVC
By Geetha Dholakia — Portfolio Program Manager at TDK Ventures
Venturing into the realm of Corporate Venture Capital (CVC) during my tenure at TDK Ventures has afforded me valuable learnings and insights into the dynamic nexus of innovation, investment, and corporate strategy. CVCs occupy a distinct niche within the investment landscape. Alongside traditional VCs, they assume a pivotal role in identifying nascent startups at the cutting edge of technology that have significant growth prospects and lucrative financial returns and offer them early-stage financing. What sets CVCs apart is their ability to provide more than mere financial backing. Leveraging resources afforded by their parent corporations (mothership), CVCs offer startups unique strategic advantages. These encompass a spectrum of support, ranging from industry-specific expertise to access to extensive customer networks, facilitating business scalability. Such support can be invaluable to fledgling enterprises when utilized effectively, underscoring the criticality of seamless coordination between corporate sponsors and portfolios (startups invested by the CVC).
CVCs Have Varied Approaches to Mothership Strategic Engagement
Conversations with people engaged in various roles in deeptech CVCs, as well as with people in corporate entities tasked with enabling portfolio-corporate engagements, has made one aspect very clear — no two CVCs are structured alike and there are many approaches to enabling successful portfolio-corporate engagements.
A few CVCs, like TDK Ventures, have specific engagement teams that facilitate such coordination, others delegate the responsibility to the investment team, while still others may find some variation between the two models or have that role within the structure of the corporate parent.
To some extent, the structure of CVC roles for mothership-portfolio engagement often aligns with the varied motivations relating to the establishment of the CVC. Some CVCs are set up to act as strategic antennae for parent corporations for scouting opportunities. Some may invest in startups that can augment R&D divisions or serve as gateways into new ecosystems where the parent may lack internal bandwidth to initiate projects independently. Others may be structured to serve as an extension of the parent M&A arm actively seeking ways to expand and improve their internal product roadmap. While some may function as quasi-independent entities with a focus on accelerating areas of emerging technologies, eyeing both financial and synergistic gains. These differences in motivation reflect the diverse strategic goals of each corporation and factor into how the CVC enables the corporate-portfolio company engagements. Ultimately, the primary objective is to establish strategic alignment between the corporation and the startup.
Insights on Strategic Alignment
Strategic alignment between two organizations isn’t a one-time event. It is an ongoing process that evolves at each stage of development. In corporate-portfolio engagements, this process encompasses various stages of the portfolio’s growth, from Seed funding through Series A, Series B, and beyond. Each organization must have a solid understanding of the other, particularly their strengths and how to augment them for shared synergistic benefit. Here are a few insights I’ve observed to be true over the years:
Fostering Strategic Alignment: Engaging the Parent Corporation from the Outset
The efficacy of the parent-portfolio engagement hinges on ensuring that CVC investments align with the overarching objectives of the parent corporation and goals of the CVC right from the outset, often identified during the due diligence process. This necessitates proactive steps from the entire CVC team, including both investment and engagement teams, even before any investment is made. They must identify and solicit feedback from appropriate business units within the mothership, that could potentially collaborate with the portfolio. This proactive approach ensures that the business groups in the mothership are well-informed of the objectives and goals of the portfolio and equipped to engage with them, thereby laying the foundation for collaboration and mutual benefit.
Optimizing Post-Investment Engagement: Maximizing Collaboration and Equal-Win Partnership
Following an investment in the portfolio and its formal introduction to the corporate business groups, the engagement process typically unfolds iteratively. This approach enables the engagement team to consistently assess the technical maturity and readiness level of portfolio companies’ solutions and identify early any touchpoints that may be suitable for collaborative projects with the parent. This can begin as evaluation projects. When sufficient readiness is achieved, formal engagements are then initiated, with the corresponding business unit of interest, which may progress to pilots, Non-Recurring Engineering (NRE) agreements, Joint Development Agreements (JDAs), with the ultimate goal of bringing out a first-to-market solution.
Unlocking Success through Communication: Cultivating Equal-Win Engagements
For an engagement to succeed, there must be motivation from both the portfolio and the business group, and for that, each must see value in the connection. This is what we call equal-win engagements at TDK Ventures. During early meetings with the portfolio companies, the engagement team must understand the near- and long-term goals of the startup and its roadmap and be able to successfully communicate this to interested business units. The better the communication, the better the quality the strategic alignment, which can then organically grow and morph as needed, to maximize mutual equal-win benefit.
A Shared Vision for Collaboration
At its core, successful strategic alignment stems from a clear and mutual understanding of each organization’s respective goals, the unique value proposition each has to offer, and consistent communication on moving together toward a shared vision.
When applied right, I’ve seen these insights build an ecosystem more amenable to success. Engaging the business groups prior to investment ensures relevance from the start, ascertaining and evaluating readiness and optimal timing for engagements ensures that they are more likely to be fruitful. Finally, one of the most important insights is that there should be impetus for each party to want to work together and succeed.
While the insights provided offer valuable guidance for any CVC engagement team, they are particularly relevant to address the unique challenges faced by CVCs investing in early-stage hard-tech startups. These startups, characterized by their innovative technologies and complex development processes, typically undergo a lengthy lifecycle marked by iterative stages of research, development, and commercialization. As they navigate this journey, they encounter various strategic goals and milestones, each requiring careful consideration and adaptation. Therefore, the insights presented here aim to equip CVCs investing in early-stage hardtech startups with the knowledge and strategies needed to effectively support and enable collaboration with the mothership.
Working within the ecosystem of the CVC has provided me with a nuanced understanding of the symbiotic relationship between portfolios and corporate entities, particularly in navigating the intricate landscape of early-stage financing and strategic support. My experiences have underscored the importance of fostering synergistic partnerships that drive both financial returns and strategic advantages in the growth trajectory of the portfolios. This journey has not only deepened my appreciation for the agility and foresight required in CVC but also reinforced the critical role engagement teams play in shaping the future of cutting-edge innovation.
