These companies are pressured to "put this capital to work" in order to
generate strategic value and/or accretive returns for the business. While they
are active acquirers of companies that are strategic to them, getting involved with
companies earlier through investment allows them to gain insights, advantage
and early access for acquisition at lower costs than when the companies develop
fully on their own. Corporate VCs are merely the vehicle corporations use to get
involved with companies earlier than at the acquisition stage.
In closing the discussion on Corporate VC, it should be noted that there are
pros and cons to this trend in the VC ecosystem:
Pros: Market Acceleration and Increased Opportunities for Liquidity
Despite some concerns, the general consensus is that the rise of Corporate
VC is a positive development in the VC industry – benefitting both traditional
VCs through co-investments and startup companies through increased access
to capital. Corporate VC participation, especially as a precursor to acquisition
activity, can help drive market adoption, accelerate revenue growth and create
exit opportunities for early investors. Corporate VCs may also add material
value in the process of building successful companies and driving innovation
by providing: (i) in-depth industry knowledge, (ii) access to potential customers,
distribution channels and lucrative contracts, (iii) solid brand association, (iv)
revenue growth, and (v) ongoing capital needed to accelerate growth.
Cons: Different Investment Motives and Return Expectations
Corporate VCs may, and often do, have expectations and desired outcomes
that are not always aligned with traditional VC investors. Traditional VCs invest
their money for one primary reason – to maximize return on investments
for themselves and their limited partners. Corporate VCs, however, make
investments based on a wide range of potential outcomes from which they can
benefit. Financial returns are a great perk, but more often than not, Corporate
45
Taiwan Economic Forum
Volume 15, Number 4
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