Corporate Venture Capital Funding

By |2017-09-14T11:21:26-07:00June 28th, 2012|

What is Corporate Venture Capital Funding?

Corporate venture capital funding should not be confused with venture capital funding; while it is similar there are distinct differences.  Unlike venture capital firms, who are typically privately financed and funded, corporate venture capital funding is financing provided by larger corporations looking to expand through external business entities.

When companies invest in early-stage start-ups they are specifically trying to gain a competitive advantage in a particular industry.  They strategically invest in companies that will help them meet their financial objectives.  Depending on the goals of a corporation, they can invest in businesses at any stage, not just at the start-up phase; they may invest in companies looking to expand.  At times, they may invest in companies that do not align with the organization’s current strategy, but would offer a significant financial return.

Many companies have implemented venture programs that are not only a source of capital for start-ups, but are an excellent resource in terms of advice and guidance. Some notable companies that offer corporate venture capital programs include Comcast, Adobe, Johnson & Johnson, Amgen, and IBM.  Every company will have their own requirements as to what business to invest in and how much.  Be sure to look into companies specific requirements and how you can go about getting financing.

To explain corporate venture capital funding even further, we will look at Google and The Walt Disney Company.

Google Ventures

When you visit the Google Ventures site, you are greeted with this statement:

A Radically Different Kind of Venture Fund

Our hands-on teams work with portfolio companies full-time on design, recruiting,
marketing, and engineering. Startup Lab is a dedicated facility and educational program
where companies can meet, learn, work, and share. We invest hundreds of millions
of dollars each year in entrepreneurs with a healthy disregard for the impossible.

Google Ventures

Google Ventures invests in companies at any stage including Seed, Series A/B, and/or Growth.  Investments are made to render a financial return and offer several resources to make sure that the companies they invest in succeed.  Not only do they offer advice from experienced team members, they offer access to Google’s resources including their technology and facilities.  This corporate investment fund offers financing to companies in a variety of areas such as gaming, mobile, life science, and consumer internet.

Working with Google Ventures has been fantastic. I have been super impressed by the people there and the value they have added to our business. Their team is incredibly smart, knowledgeable about our space, and focused on making our business better. We couldn’t be happier!

Cotter Cunningham
CEO, WhaleShark Media

Steamboat Ventures

Steamboat Ventures is the investing arm of the Walt Disney Company and its name is derived from the Steamboat Willie production, which is when Mikey Mouse was first debuted.  Started in 2000, this Burbank based firm has locations in Los Angeles, Shanghai, and Hong Kong.

Our mission at Steamboat Ventures is to help young companies successfully face the challenges of becoming leaders in their markets. We invest in early through growth stage companies that are pursuing opportunities at the intersection of technology, media, and consumer sectors.

Steamboat Ventures

This corporate venture capital firm offers funding to companies in all stages and will invest $2-$15 million in a single firm with a maximum investment of $20 million.  They provide companies with a knowledgeable team of people who are working towards making the businesses successful.  In order for a company to receive funding, it is required that they have a Steamboat Ventures team member present on the company’s board or give them observation rights.

What is the financing process?

The process of obtaining financing from a corporate venture fund is similar to pursuing funding from a VC firm.  Here are the steps involved in CVC funding:

  1. Initial contact: Companies and startups looking for corporate venture funding can seek out and contact firms that would potentially invest.  The large corporations are also actively seeking out companies to invest in and may be the first to make contact.
  2. Present a business plan: Like venture capital firms, corporate venture capital firms want to see that you know your business and can communicate it verbally and in writing.  They want to see that you have done research on whether your product or service would be viable in the market.  This is why writing a business plan is essential to the corporate venture funding process.  The firm’s team wants to see clear-cut information that shows they will get a return on their investment.
  3. Term sheet negotiation: Corporations will use a term sheet to determine the value of the company or startup.  At this time, the CVC’s will make an initial offering to the business, after which they can accept or reject the terms.  Once the price negotiation process is in swing, both the corporate venture capital firm and the company with work with legal counsel to finalize the price.
  4. Financing: After all negotiations have been made between the company and CVC as well as both legal parties, the final price is made and the funds are offered.

Is your company looking to get financed by a CVC? Would love to hear about your experience!