Corporate venturing (CVC): innovating by investing

Corporate venturing is the way an established company invests in startups to access innovation, technologies and markets it would struggle to develop purely in-house. It is neither philanthropy nor simple financial diversification: it is a strategic tool. When it works, it lets the corporate “see change coming first” in its sector and gives the startup access to capital, customers and distribution channels.

Why a corporate invests in startups

The motivations almost always intertwine on two levels.

• Strategic: to hold ground in emerging technologies, explore adjacencies to the core business, defend against disruption, feed the innovation pipeline. This is the main engine of CVC.
• Financial: to obtain a return on investment. It remains important, but is rarely the sole reason: a corporate investing purely for return would do better to rely on third-party funds.

The real value lies in synergy: the startup gains access to industrial expertise, facilities, data and commercial networks that a pure fund cannot offer.

The main models

There is no single way to do corporate venturing. The most widespread formats:

• Direct CVC: the company invests directly in the startups’ equity, on its own or as a co-investor in a round led by a VC.
• Dedicated fund: a separate vehicle is created, with its own team and mandate, often with partially independent governance to decide at the speed typical of venture.
• Fund-of-funds: the corporate invests as a limited partner in external VC funds, gaining visibility on deal flow without managing the investments directly.
• Venture building and partnerships: building internal startups, incubators/accelerators, joint ventures or commercial agreements with equity. Here the emphasis is more on operational collaboration than on financial investment.

The critical success factors

Corporate venturing almost always fails for the same reasons, all managerial rather than financial.

• A clear mandate: strategic or financial objectives? Ambiguity here paralyses decisions.
• Speed of decision: venture timelines are not those of a corporate committee. A dedicated process is needed, with real delegated authority.
• Alignment of incentives: the CVC team must be assessed on coherent metrics (strategic impact and multi-year returns), not on the quarterly KPIs of the core business.
• Managing the relationship with the startup: the aim is to help it grow, not to absorb it prematurely. Governance rights that are too invasive make it less attractive to co-investors and slow its development.

How it is structured in practice

On the operational side, a corporate venturing programme requires three founding decisions: the vehicle (direct balance sheet or a separate entity), the governance (who decides, with what thresholds and what rights over the investees) and the portfolio strategy (investment thesis, average ticket, horizon, exit criteria). The holdings must then be followed over time: valuation, accounting consolidation where applicable, management of rights in subsequent rounds and consistency with the clauses (liquidation preference, anti-dilution, tag and drag) signed on entry.

In Switzerland a dedicated vehicle generally takes the form of an AG, for the flexibility in managing share classes and in bringing in co-investors, with tax and accounting impacts to be assessed case by case.

How we work

SIH ONE supports companies and groups in designing corporate venturing programmes: choice of vehicle, governance, due diligence and management of holdings. If you want to innovate by investing in the startup ecosystem, let’s talk with our capital team.