How to Make the Corporate VC Fund Model Work

How to Make the Corporate VC Fund Model Work

June 15, 2021 by investor

While traditional venture funds increase their fund size over time, corporate VCs should keep their fund size low.

Traditional VCs seek higher compensation and can do so by increasing the size of the fund which increases their management fee.

Corporate VCs are often compensated as employees of the company with some upside on successful outcomes which are not necessarily financial exits.

Collaboration, partnerships, and pilots are the most often used metrics for funded companies in a corporate VC fund.

Therefore it is important to keep the costs low especially at the start, and then grow it over time as you prove out the program.

It will be easier to provide a positive return on investment for a $25M fund rather than a $200M fund.

This will reduce the dollar investment into each startup but there again, it’s best to start small and increase the investment per company over time.

A large fund may also draw criticism from other departments in the corporation who want that budget for their purposes.

A large fund can create a culture of “contracted labor” rather than a culture of collaboration.

The final outcome is not a financial return, but successful collaborations and pilots.

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.