Five Reasons Corporate Venture Capital Programs Fail

David Horowitz
Jun 3, 2019 · 5 min read
Image for post
Image for post
Image: Shutterstock

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

The goal setting and associated KPI process described in my “Measuring Success in Corporate Venture Capital” article provides a framework to demonstrate to senior executives at the corporation that the corporate venture fund can make an instant impact.

2. Inexperienced Team

3. Rushing To Make Too Many Investments

4. No Financial Discipline

5. No Budgets For Follow-on Investments

Image for post
Image for post

There are many other reasons why corporation venture capital programs fail beyond these five. Ultimately the right formula is: hire the right team, set-up the program with the right goals and strategy, adhere to best practices, and be “friendly” to founders and start-ups. If you follow these steps, you can lower the risk that your program will be shut down.

Liked what you read? Click 👏 to help others find this article.

Image for post
Image for post
Image for post

David Horowitz is the CEO and co-Founder of Touchdown Ventures, a Registered Investment Adviser, that manages venture capital funds for corporations. Thanks as always to my co-Founder and President Scott Lenet who helped contributed to this article.

Unless otherwise indicated, commentary on this site reflects the personal opinions, viewpoints and analyses of the author and should not be regarded as a description of services provided by Touchdown or its affiliates. The opinions expressed here are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any security or advisory service. It is only intended to provide education about the financial industry. The views reflected in the commentary are subject to change at any time without notice. While all information presented, including from independent sources, is believed to be accurate, we make no representation or warranty as to accuracy or completeness. We reserve the right to change any part of these materials without notice and assume no obligation to provide updates. Nothing on this site constitutes investment advice, performance data or a recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Investing involves the risk of loss of some or all of an investment. Past performance is no guarantee of future results.

Risky Business

Thoughts on corporate VC from the team at Touchdown…

David Horowitz

Written by

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

Risky Business

Thoughts on corporate VC from the team at Touchdown Ventures, the leading provider of managed venture capital for corporations.

David Horowitz

Written by

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

Risky Business

Thoughts on corporate VC from the team at Touchdown Ventures, the leading provider of managed venture capital for corporations.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store