CORPORATE VENTURE – AS A SERVICE

Corporate Venture
– As a Service
A unique offering to medium and larger
sized corporations
The big idea. Start scouting for new arenas, screen and invest in candidates.
Or, inspire incubation of new businesses. Plug-in into a unique scouting platform to inspire incubation of new corporate business. Get back into the driver’s
seat of managing disruptive opportunities and threats.
42associates.com
Why? Corporate
Venture is on the
rebound – but the
format is new.
Take a stroll back 15-20 years down memory lane. Large companies
opened Corporate Venture functions. As smaller companies rose in
value fast, many corporates saw the technology access ticket grow
more and more expensive. Therefore, Corporate Ventures where set
up – typically as venture funds - to invest and thereby gain access to
key technologies.
In the wake of the internet bubble in the beginning of our century, many corporates closed down or reconfigured their corporate venture functions. The following crisis at the end of the 00’s turned corporate focus
on short term results in order to secure profits and in some cases, survival. Consequentially, acquisitions
became less explorative and more focused on traditional M&A within core business areas. Arguably, this
was done for good reasons.
Now, and in the last couple of years, venture money in is on a rise (up 40% compared to the 00’s) and venture
deals are in general getting bigger and later stage than in the previous decade. In addition, pre-money values
are on the rise.
The balance of managing Corporate Venture is still intact, though. On one side, corporates must make
sure they have ongoing access to technologies and do not end up having to make very expensive late-stage
acquisitions (in order to catch up with competition). On the other hand, the cost of setting up a Corporate
Venture unit and associated costs must not outweigh the benefits. The problem remains – this is often
difficult to predict beforehand.
However, in recent years, Corporate Venture has caught the interest of many corporates. In the wake for of
the financial technology boom, many banks have re-launched Corporate Venture. However, the re-launch
is now more varied. This includes the top financial institutions.
Indeed, Global Top Financial Institutions are launching Corporate Ventures anew – and they are doing it
differently than in the previous decades. This is very clear when looking across which types of Corporate
Venture Programs are launch by Financial Institutions.
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Typical Corporate Venture approach within
Financial Institutions
Percent
43
20
20
10
Start-up incubation
programs
Partnerships
with start-ups
Launch of
Venture Funds
Direct
acquisions
7
Launching
subsidiaries
Hence, there are many ways to achieve the same. Ultimately, corporate value development is established in
order to secure an ongoing competitive advantage by having access to technologies. However, Corporates
still need to consider which model is right for them.
______
Corporate Venture hosted by 42
At 42 Associates, we can help Corporates clarify which model is most advantageous to balance costs with
benefits. For any corporates however, the most cost effective option – at least to get started – may be to
plug into an external scouting platform.
At 42, we already have a number of Micro Funds, for which we have a scouting platform. Therefore, we are
able to leverage our scouting platform to benefit multiple corporates – to the clear benefit of everybody.
Our services across the Corporate Venture value stream include:
SCOUT
EVALUATE
PRESENT
INVEST
SCALE/BUILD
INTEGRATE
’
SCOUTING
FACTORY
VALUATION &
SYNERGY
ASSESSMENT
CO-INVESTMENT THROUGH 42 VENTURES
AND CONSULTING SERVICES
As a company, you decide exclusively how much you want to outsource. You can limit this to scouting and
rough evaluation – or you can include further scaling, building and integration activities. It is up to you.
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The 42
scouting platform
An outsourced corporate venture needs to have a constant feed of candidate investments that fit your
investment criteria and domain interests.
Our scouting platform is one of our key value propositions. Our global scouting factory with a dedicated
scouting team in Copenhagen and San Francisco will be your guide to the future. Your candidate pipeline
will be regularly assess either ad hoc or through regular report based on your preferences.
The scouting factory leverages multiple scouting sources:
• 42’s industrial network of business partners and clients
• 42’s scale platform for igniting and accelerating new tech start-ups
• 42’s consulting partners in The Future Agency and Singularity University
• 42’s academia partners such as Hyper Island, MIT and Stanford University
• 42’s access to multiple beta-lists and open scouting sources online
In addition to the scouting platform, 42 can provide due diligence service to assess the value of companies
(factoring both internal synergies as well as the financial performance of the companies themselves).
Further, we can help you scale, build and integrate the companies through our consulting services.
______
Getting started
If you are considering Corporate Venture as a Service, there are a number of elements you need to consider,
before we can start scouting for you.
• Company purpose of pursuing corporate venture
• Corporate Venture models in play
• Key attributes and criteria for potential technologies/targets
• The linkage between you current organizational capabilities and 42
Firstly, you need to consider the key purpose of trapping into new technologies. What’s the trade-off between
costs and benefits? Where, historically, has the company been out of balance – e.g. by having to late entry
catch-ups, expensive program, or simply missed out to competitive forces.
Second, you need to consider which Corporate Venture models could be in play. As previously discussed,
there are more than one way of setting this up. Maybe, the organization has positive and negative experience
which can be leveraged.
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Third, key attributes and criteria need to be investigated. Which technology domains are in play? Some
investors are interested in very early ideas that may have proof of concept. Other possibilities include
later Series A and early B investments, where there is a clearer “line-of-sight” in terms of proof of business
and scalability. In addition, other criteria (e.g., geography, management team, patents, etc.) should be
considered.
Finally and fourth, you should consider the organizational elements if you find “Corporate Venture as a
Service” interesting. What can be done efficiently within your own organization, and what can be done
outside the company?
For more information.
Please contact
Jakob Wedel
wedel@42associates.com
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42 Associates
Christian IX’s Gade 7
DK-1111 Copenhagen K
Tel.: +45 4236 4000
cph@42associates.com
42associates.com
42 Associates Inc.
44 Tehama Street
San Francisco, CA 94105 · USA
Tel.: +1 415 812 6646
sf@42associates.com