Corporate Venture Capital: Deals Selection Process, Advantages, Disadvantages, and Challenges of Selected Cases.

Details

Supervisors

Gailly, Benoît

Faculty

Louvain School of Management

Degree label

Master [120] : ingénieur de gestion, à finalité spécialisée

Abstract

Corporate Venture Capital can be defined as a program that large corporations can set up to invest in young companies. These investments are made with financial and/or strategic objectives. The goal is to make a financial return, but also sustain innovation in these big corporations, build their ecosystem, technology and make new commercial partnerships. Because there are so many ways to manage CVCs, it is difficult to draw a generalization of the practices. In light of this difficulty, this paper aims to better understand the difference between the literature review and the practices of the six interviewed CVCs. This paper tackles more precisely the selection process, the advantages, disadvantages, and challenges for CVCs. First, the theory related to these topics will be developed, and key findings will be presented. Second, interviews will be conducted and analyzed to identify the differences between the practices of the interviewed CVCs and the theoretical findings. Finally, a conclusion will be made on the main differences, and managerial recommendations will be given. This paper presents some differences between the practices of the CVCs interviewed and the theoretical findings. For example, the primary source of deals for most of the CVCs is the startups contacting them, whereas it is stated in the theory that the first source is internal scouting. We have also seen that the screening and due diligence stages are technical and difficult to define precisely, therefore the paper provides some illustrations and brings clarification on these steps. The interviews confirmed most of the advantages, disadvantages, and challenges found before, and added some more. This paper also confirmed that the credibility gained by startups is the most important advantage for them. Furthermore, it addresses the problem of knowledge codification as a major challenge of startups, an issue that has not been raised in the literature review. To conclude, managers should implement a system that supports knowledge management to ensure the sharing between the startups and the corporates. They should also encourage the discussion between the parties, and make sure to define clear success measures.