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How corporate venture capital investing differs from traditional VC

CVC investing can jumpstart innovation if executives understand VC best practices and differences with institutional VCs.

In brief

  • CVC investing has a lot in common with institutional VC, but there are key differences.
  • Setting up an effective operating model and governance structure can help companies make timely CVC investment decisions.
  • CVCs can leverage the parent corporation to bring product, distribution, supply chain and other expertise to an investment.

Lead author Scott Lenet is President of Touchdown Ventures, a Registered Investment Adviser that provides "Venture Capital as a Service" to help corporations launch and manage their investment programs.

EY-Parthenon team and Touchdown Ventures have collaborated to assist companies in establishing and managing corporate venture capital programs. Touchdown Ventures has been recognized by Global Corporate Venturing for launching the most CVCs. We partnered on this article to provide our views of seven typical differences between VCs and CVCs.

Company executives looking to add new capabilities or enter new markets can consider corporate venturing as an option to jump-start innovation. But to get the most out of corporate venture capital (CVC) investment, CEOs and their teams need to understand the leading practices of venture capital, as well as how corporates can leverage their strengths to access relevant deals.


“Traditional” venture capitalists are called institutional investors, financial VCs or simply VCs, while corporate investors are best known as CVCs.


These two types of investors have a lot in common. Both make minority investments of cash in exchange for equity ownership in private companies. Both attempt to provide various forms of operational support to help these companies grow. And, for the majority of investments, both seek a financial return when the start-up is ultimately sold or completes a public stock offering.


In these two variants of venture capital, the fundamental activities and processes are largely the same: (1) source opportunities, (2) perform diligence to evaluate their attractiveness, (3) negotiate and execute transactions, (4) manage the resulting portfolio of investments and (5) guide them through the process of achieving liquidity. Each type of organization also has various stakeholders demanding coordination and communication.


Beyond the above commonalities, these two types of investors can also be very different.


Seven typical differences between CVCs and VCs


CVC investing can be an important tool for adding capabilities and innovation to a company. However, executives need to understand how CVC differs from traditional VC and leverage these differences in their favor when appropriate.

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