Corporate Venture Capital Investing

Corporate venture capital investing is a type of investment where an established company invests money into a small, startup company. This type of investing has benefits for both the investing company, and the startup company. There are several strategies that a company could use when investing in another business. These strategies include changing the management team, expanding into a new market or simply investing for return. Here are a few things to consider about corporate venture capital investing.

Corporate Venture Capital Investing

Many people get this type of investment confused with other similar types of investments. Corporate venture capital investing involves a large company making direct investments into a smaller company. The company is not taking over the other company, nor is it investing in a private equity fund that will manage the investment. Instead, the company is going to remain separate from the smaller company and will not invest through a third-party.

Competitive Advantage

The primary reason for this type of investment is to create a competitive advantage in the marketplace. Many times, a larger company will identify a smaller company that has good potential for growth. The larger company typically believes that it can help the smaller one by providing the necessary capital and expertise that it needs. In many cases, the companies that are invested in have some type of patent or another competitive advantage that can be used in the market place.

Management

In some cases, the larger company will provide management and consulting services to the smaller company. The company will not necessarily take over the smaller company but it can provide superior management services for them. By doing this, the larger company hopes that they can make a difference in the success of the smaller company and make it much more efficient.

Types of Investment

Corporate venture capital investing can involve several different types of investments from the larger company. One type of investment is known as a driving investment. This is a strategy in which the larger company seeks to align their objectives with the smaller company's objectives. Another type of investment, known as enabling investments deals, with providing money to a company that produces a complementary product to the product that the larger company produces.

Emerging investment is another type of investment that the company could make. This is a type of investment that will essentially allow the larger company to explore other markets that they do not necessarily want to open a new business in themselves. If it goes well, the company might decide to open an entirely new business in that market. If things do not go well, they have only spent a small amount of money to test it out.

The last type of investment that can be made with corporate venture capital investing is a passive investment. This type of investment only seeks to provide financial support to the smaller company. The larger company does not take any interest in the operations of the company. Instead, the investing company wants to realize a return on their investment.

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