Companies setting up a corporate VC arm often make the following mistakes:
Treating the corporate VC arm as purely an acquisition pipeline.
There are several other ways to gain value from a corporate VC structure than just recruiting target acquisitions.
Not taking enough risk in selecting startups to pursue.
The startup world has a higher level of risk involved than what most large companies find normal.
Not accepting the fact that there will be failures and planning for it.
Most companies want to succeed at everything. In the startup world, there is a high failure rate and there must be a program to manage those failures.
Not giving the startups enough time to develop and mature.
Startups can take several years to develop a meaningful product.
Most VC funds are set up for a ten-year cycle.
Make sure your company is committed to at least that time frame for running a corporate VC program.
Treating the corporate VC arm as a business development unit.
The VC arm should be working on next-generation technologies and not just the current generation.
Requiring a majority stake which can be difficult to negotiate and support. Minority stakes are a better fit as it brings other investors into the process.
Low balling the budget.
True innovation is not cheap or easy.
Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.
Let’s go startup something today.
Thank you for joining your host Hall T. Martin with the Startup Funding Espresso — your daily shot of startup funding and investing.
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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.