Corporate Venture Building explained

Innovation plays a crucial role in ensuring the success of a company in today's globalized economy and securing long-term business success across generations. Established companies in all industries are increasingly challenged by new technologies and digital startups. To secure sustainable competitive advantages, companies must constantly reinvent themselves and generate innovations. One way to drive corporate innovation and foster innovative activities is through corporate venturing.19. July 2023
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What is Corporate Venture Building?

Corporate venture building leverages existing resources of an established company to create a new business unit within or outside the existing organization. Traditionally, ventures are built as completely separate companies from the ground up. This can involve concepts closely aligned with the existing business model or completely new business opportunities. Large companies have the advantage of utilizing their existing resources, such as customer relationships, infrastructure, and databases, to realize new business models and drive innovation. In their corporate ventures, large companies aim to establish the characteristics crucial for innovation found in young startups by creating operational independence from the parent company and eliminating bureaucratic structures. Combined with the strengths of the parent company, such as financial resources and expertise, the new venture can grow rapidly and bring significant value to the parent company. Corporate venturing supports the growth of the parent company and ensures long-term business security.

What is a Corporate Venture Builder?

Corporate venture builders accelerate internal innovation processes by identifying relevant business ideas with the goal of developing new business models that are then spun off into separate entities. The strategic goals of the parent companies are always taken into account. The process begins with ideation, collecting suitable proposals for the existing company. These ideas are then analyzed, prioritized, and further developed. During the validation phase, the most promising business ideas emerge and are developed and implemented until they reach a market-ready version. The initial market feedback helps improve the product, generate new customers and sales, and ultimately lead the newly founded company to success.

Incubator, Accelerator, Company Builder – What are they, and where does corporate venturing fit in

Start-ups require a lot of support to realize their ideas and achieve market success. There are various potential partners that can support a start-up in its different stages. Incubators are a starting point for very early-stage projects that have not yet surpassed the conceptual phase. The purpose of an incubator is to build and support the business development of companies in their very early stages, enabling the development of promising business ideas and product concepts. The support provided by incubators can vary significantly, ranging from funding to operational assistance, where expert teams are assigned to founders, for example. Accelerators, on the other hand, aim to accelerate the growth of an already existing business model and target young start-ups that have already developed a market-ready version of their product and tested customer demand. They assist in further product development and strive to expedite market entry. Accelerators provide tools, financial support, and actively assist in establishing processes and infrastructure for the start-up. Company builders offer support not only in one phase of the project but actively shape the company throughout multiple stages. They may enter the company at a very early stage or even act as co-founders. While some primarily contribute their expertise to expedite the start-up's success, others also provide financial resources. Corporate venturing is categorized within the realm of company builders. Corporate venture builders are dedicated to the development and growth of companies in which they participate and become co-founders. However, in this form of company building, independent or standalone entities are realized with the support and resources of a larger corporation.

How does a Corporate Venture Builder proceed?

The process generally consists of three phases. In the "Ideation Phase," a deep understanding of the starting point is gained. Insights into the market, competition, start-ups, trends, customer needs, and competitive advantages are gathered, and market and asset analyses are conducted to structure and identify business ideas. These ideas are then evaluated to filter out the most suitable ones for the company. They transition into the "Validation Phase," where the business ideas are refined, and the business model is tested for customer interest and technical feasibility, among other factors. If the business model is successfully validated, the operational implementation follows. A first market-ready version of the product is developed, and a functional organizational unit is established to prepare the company for market entry. Utilizing the initial market feedback, the product is improved until scaling and continuous expansion are ensured.

Why is Corporate Venturing important for companies?

Young companies are particularly adept at recognizing and utilizing innovation potentials, often surpassing larger companies in this area. This advantage is partly due to the perceived innovation inertia that larger companies may face as their organizational structures become more entrenched. Additionally, future development paths may be limited as company resources focus on existing activities. As a result, companies may lose their transformative and innovative capabilities, risking the erosion of their competitive advantage due to changes in the business environment. Corporate venturing offers a promising solution to counteract this by allowing companies to pursue new innovative ideas detached from day-to-day operations, without being hindered by existing corporate structures. At the same time, companies can leverage their existing resources as a competitive advantage and achieve faster results compared to startups starting from scratch.

What to do in case of lacking resources and expertise?

Many companies do not have corporate venture builders or lack experience in establishing new ventures, requiring support in implementing such endeavors. The right approach is crucial from the initial ideation phase to venture spin-off. Without expert knowledge, valuable time and money can be wasted. This is where digital venture and business builders come into play. By providing resources, industry knowledge, and methodology gained through years of project experience, these builders help companies save valuable time and achieve better results in the innovation process. Whether it's developing digital products and services or establishing a new organizational unit within an existing organization, many venture and business builders possess the necessary experience that is critical to the success of building new digital business models.

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