Corporate venturing: the ultimate guide

Your ultimate guide to understanding what corporate venturing is and how you can use it to accelerate innovation and growth.

This practical, easy-to-use guide will give you the insight, inspiration, and resources you need to take your corporate venturing strategy to the next level.

Table of contents

  1. Corporate venturing: An introduction
  2. What is corporate venturing?
  3. Beating the startups at their own game.
  4. How does corporate venturing boost innovation?
  5. What are the benefits of corporate venturing?
  6. What are the challenges of corporate venturing?
  7. 2 winning corporate venture examples.
  8. What types of corporate venturing tools are there?
  9. How to choose the right corporate venturing tool.
  10. Corporate incubators vs corporate ventures.
  11. How to choose the right entity structure for your corporate venture.
  12. Companies that used corporate venturing to explore D2C.
  13. What if my corporate venture fails?
  14. Corporate venturing as part of your innovation strategy.
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1

Corporate venturing: an introduction

New startups are sprouting up every day, bringing new value to the market, and disrupting the status quo with impressive innovations, new technologies and novel business models. Generational changes in spending power along with COVID-19 related shifts in consumer behaviour are further transforming the landscape, resulting in a:

  • Distrust of large enterprises
  • Preference for no-hassle online purchases
  • Decreased response to traditional advertising

Corporations, in turn, are looking beyond their trusted walls for new ways to:

  • Keep up with the challenging pace
  • Solidify their positions as market leaders
  • Future-proof their businesses

Corporate venturing is a powerful strategy that companies can leverage to achieve these goals.


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What is corporate venturing?

Corporate venturing is a proven innovation and growth strategy in which a larger, more established company enters into a joint venture with one or more small, innovative startups. The goal of a corporate venture is to effectively leverage corporate assets to develop innovative products and/or services.

Entering a corporate venture can help established organisations tap into new markets, experiment with new technologies, try out new business models and create new revenue streams - all at a fraction of the risk.

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Beating the startups at their own game.

The startup formula clearly works, as evidenced by some of the more popular cautionary tales. E.g. Airbnb vs traditional hotel chains, Uber vs the taxi- and rental car industries, Amazon vs the retail industry, the list goes on and on. So, are corporations just supposed to wait around for the next startup unicorn to come in and steal their market share from under them?

The answer is a definite and resolute no.
Corporate venturing can help you leverage your assets, reach new markets, discover new technologies, and adapt your core strategy to better meet today’s market challenges.

4

How does corporate venturing boost corporate innovation?


To answer this question, we’ve listed some of today’s most common innovation challenges and how you can use corporate venturing to overcome them:

1. A lack of agility.

Everyone wants to be the first to take advantage of new growth opportunities (i.e. adopting a new technology or business model or putting out a new offering), leaving competitors in the dust. This can be a challenge for corporations with strict rules and hierarchies that prevent fresh concepts from moving past the proverbial drawing board.

How corporate venturing can help.

Corporate venturing helps enterprises bypass all the regulations and high chains of command by investing in independent ventures. This enables them to experiment with new technologies, offerings and business models, quickly and efficiently, the same way startups do.  

2. Limited access to new technologies.

Testing out new technologies is hard within corporations because of their sheer size and the potential risks involved in making big changes at that scale.

In addition, many corporations lack the know-how, initiative and exposure to technologies that can potentially revolutionise their industries. It’s a huge missed opportunity that smaller players can exploit to steal market share and gain a competitive edge.

How corporate venturing can help.

Startups are renowned for accessing, utilising and producing next-generation technologies. Corporations that build their own startups have direct access to these new technological advances, which can be leveraged to stay ahead of startup competitors.

3. Outdated customer experiences.

What people consider to be a good customer experience is changing as quickly as the markets are. Customers are placing less value on actual products and leaning more towards companies that offer memorable experiences. This is becoming an increasingly significant trend as younger generations gain spending power (e.g. Gen Z).

How corporate venturing can help.

Corporate startups are a great way to experiment with new customer experiences without hurting your brand. Their small, flexible nature enables them to test out different growth marketing, branding and selling strategies to quickly pinpoint what works and weed out what doesn’t.

4. Trouble accessing new markets.

Large enterprises that have built their success on meeting traditional customer demands can have difficulty reaching and connecting with younger generations. These days it’s all about convenient digital offerings, customised experiences, and a story that reflects the customer’s values (e.g. minimalism, sustainability, eco-friendliness, etc.).

How corporate venturing can help.

Corporate venturing can help you bridge the generational gap with new business models, messaging and digital offerings.

5. Difficulty testing and validating new concepts.

There are plenty of lean and agile ways to test new concepts, including smoke testing, customer interviews and online surveys. The challenge is that many corporations have not yet optimised their approach and are still doing R&D the old-fashioned way (e.g. telemarketing). This can be highly expensive and inefficient.

How corporate venturing can help.

Corporate ventures are a highly effective way to test out new ideas and concepts. They work like sounding boards, validating new technologies, products and services in small, controlled environments.

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What are the benefits of corporate venturing?

Corporate venturing is the key to speeding up innovation and financial growth in a rapidly changing market driven by disruptive startups. We’ve outlined some of the benefits below:

1. Speed

We’ve already gone through some of the factors that make it difficult for large corporations to innovate at the same speed startups do. Corporate ventures enable large companies to explore new opportunities with the same flexibility, autonomy and agility as startups.

2. New core business opportunities

Many fresh ideas in corporations are written off as “irrelevant because it’s not our core business”. This leaves these companies clinging to outdated offerings that could soon be made irrelevant by disruptive startups.

3. A broader market window

When scouting out for new business opportunities, companies are forced to learn about new and emerging markets. This leads to new insights that can broaden your vision and provide insights that can be applied to your current market - enabling you to better serve your customer of tomorrow.

4. High rewards with low risks

Launching corporate ventures enables companies to test new ideas in a lean, controlled setting. This is considerably less risky than testing a new concept, technology or business model company-wide, where it can be costly and damage the brand. Ideas and concepts that work can be rapidly scaled, and those that fail can be shut down with no real damage to the mothership.    

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What are the challenges of corporate venturing?

When it comes to corporate venturing (or any strategy for that matter), it’s imperative to anticipate the bottlenecks and have ways to overcome them efficiently. To help you do that, we’ve listed some common corporate venturing challenges and their simple solutions:

Challenge 1. Choosing the right venture.

Many corporations have trouble identifying the right criteria to choose their ventures. This will inevitably lead to difficulties down the road, like not getting the expected returns or not using the right tools to develop the venture.

The solution.

A good rule of thumb to avoid running into this challenge is to make sure your venturing arm is laser-focused on the company’s long-term growth goals, targets and resources. Build your decision criteria based on the corporate assets you can leverage as an unfair advantage.

Challenge 2. Balancing venture speed and corporate governance.

Corporate assets like partnerships, expertise, funding, and other resources are vital for any successful corporate venture because they give you an advantage over competitors.

The problem is that it’s not always easy to leverage the necessary assets at the speed required by the startup. Corporate governance delays can cause the new venture to lose momentum and not reach its growth targets on time.

The solution.

The best way to address this challenge is to get ahead of it with proper planning and communication. A venture board can also be of great help, operating as an added layer around the team to ensure their success.

Challenge 3. Using the right incentives.

Successful ventures require a leadership team that is resourceful, driven, motivated and above all, entrepreneurially minded. They need to have the proper incentives to go the extra mile and genuinely feel invested in their projects. Many corporations struggle to find the right incentives, which can be detrimental to the venture’s long-term success.

The solution.

Avoid this challenge by daring to incentivise your leadership team with the right legal entity setup and personal incentives. Use KPI-driven bonus models or offer equity shares.

Challenge 4. Managing customer data.

Customer data has become an extremely precious resource. When efficiently leveraged, it can help you customise your offerings, improve your customer experience, increase sales, connect with your target audience and add useful features to existing products.

The problem is that even with all the available technology, we’re still having trouble collecting, analysing and securing it.

The solution.

Here are a few useful tips to help you manage your corporate venture’s customer data:

Know what you want to achieve with your data.

Make the most of your data by linking it directly to your strategy. Remember, each objective you set at any phase must be measurable.

Make security a priority.

According to IBM Security, the average cost of a company data breach globally is $3,86m (not counting the loss in customer trust). Take these steps to secure your data:

  • Use a Customer Relationship Management (CRM), Customer Data Platform (CDP) or Data Management Platform (DMP).
  • Invest in a data backup system.
  • Make sure your employees are trained and certified to handle confidential data (GDPR).

Make sure your data is updated and accurate.

Customer databases can quickly become cluttered, outdated and incomplete, leading to inaccurate conclusions during analysis. Take steps to prevent it.

Challenge 5. Ecosystem positioning.

A business ecosystem is a set of companies that complement each other by:

  • Supplying products for those in the ecosystem.
  • Combining their offerings to create new value for the customer.
  • Providing different ways to reach customers.

The challenge is that it can be hard for new ventures to position themselves in an ecosystem and collaborate/partner/plugin into these complementary networks.

The solution.

Figure out what goals best fit your company’s capabilities:

  • Is your goal to accelerate growth?
  • Create new offerings?
  • Build end-to-end solutions?

Once you know that, you can start working towards your goals by establishing the right strategic partnerships and bringing in the entrepreneurial talent needed to move your agenda forward.

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2 winning corporate venture examples.

To give you a better idea of how corporate venturing works in practice, here are two examples of ventures that are helping their parent companies innovate from within:

1. Heineken’s Beerwulf

Headquarters: Amsterdam, NL

Industry: Food & Beverages

Founded: 2016

Flagship product: Craft beer platform

Employees: 51-200

Beerwulf is an online platform designed by and dedicated to beer enthusiasts. Its mission is to make a wide variety of craft and speciality beers accessible to everyone.

What makes this a successful venture?

When it came to the growing craft beer market, Heineken decided to facilitate the trend instead of fighting it. Today, Beerwulf is a thriving D2C platform where homebrewers can offer their creations to the public using Heineken’s infrastructure and reach. It also provides Heineken with insights about the different preferences of their beer enthusiasts.

2. ABN AMRO’s New10

Headquarters: Amsterdam, NL

Industry: Banking

Founded: 2017

Flagship product: SME digital lending services

Employees: 11-50

New10 is a fintech startup that enables SMEs and entrepreneurs to get loans online and find out if they qualify within 15 minutes.

What makes this a successful venture?

Through New10, ABN AMRO got to experiment with new technologies and learn from an alternate business model without risking too much capital. This led to:

  • The chance to adapt to the changing standards in the business loans market
  • Innovation without rocking the bank’s internal structures
  • Access to a broader target audience.

The platform is also a treasure trove of valuable insights, enabling the bank to learn more about its customer’s needs and preferences.
For more examples, download our 50 corporate ventures report.

8

What types of corporate venturing tools are there?

There are a total of 16 different tools, each helping companies accelerate growth and boost innovation in different ways:

1. Corporate venturing capital (CVC)

When corporations use direct equity investments to target startups of strategic interest.

2. Mergers & acquisitions (M&A)

When established firms purchase startups and their commercial-ready products in order to access new technologies or markets.

3. Corporate accelerators

Corporate accelerators offer highly structured programs that typically last about three months. These programs provide startups with the facilities, resources, and expertise needed to speed up their product development and prove themselves on the market.

4. Corporate incubators

Corporate Incubator Programs include mentoring and value-added services to support entrepreneurs in building viable, market-ready ideas. A corporate incubator starts even before the idea is created.

5. Venture development studios

A venture development studio, startup studio, company builder, or venture builder is a structure that creates startups based on shared resources and a multidisciplinary team. It provides what is known as “Startup as a Service”.

Bundl is an excellent example of how a venture development studio works, teaming up with corporates to create new ventures and discover new markets. Check out our cases page to learn more about how we build corporate ventures.

6. Strategic partnerships

Alliances between established corporations and startups can take many forms — including the co-development of products and services.

7. Hackathons

A Hackathon is a focused workshop where software developers come together to collaboratively find technological solutions to a corporate innovation challenge.

8. Acqui-hires

Acqui-hiring is the process of acquiring a company to recruit its employees without necessarily showing an interest in its products, services , or continued operation.

9. Sharing Resources

A means to grant startups access to resources while the established corporations get closer to the entrepreneurial ecosystem.

10. Excubators

Startup excubators enable development studios to use their own external team to carry out venture projects on behalf of a third party, individual, or company.

11. Entrepreneur-in-residence (EIR)

An Entrepreneur-In-Residence is an informal and usually temporary position at the corporate venture capital arm of the company. The role of an EIR includes introducing organisations to new business models, technologies, and strategic partnership opportunities. Their main goal is to build bridges into the startup community.

12. Challenge prize

An open competition that focuses on a specific issue, offering an incentive to field innovators who develop the best solution.

13. Scouting mission

The established company appoints an individual within a given industry to scope out innovation opportunities in alignment with the corporate strategy.

14. Employee jurors/mentoring

The role of these team members is mainly to participate in startup competitions and spot emerging technologies or business models early.

15. Corporate university partnerships

These partnerships consist of a collaboration between corporate R&D departments and university researchers to find promising ideas for further development and investigation.

16. Licensing

Licensing enables corporations to apply innovations developed by startups to new markets, industry sectors, and customer segments.

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How to choose the right corporate venturing tool.

Now that you know more about your corporate venturing options, it’s time to identify which innovation tools work best for your organisation. Start by identifying your corporation’s higher-level objectives (i.e. the goals you want to reach) using the handy corporate objectives chart below:


Once you’ve done that, you can use the guide below to find out which tool would be most effective in helping you reach your specific objectives:

Ecosystem

Companies seeking an ecosystem objective need tools that can create an effective platform for startup engagement. We recommend tools like accelerators, events, and sharing resources.

Culture

Is your team or corporate structure lacking a startup mindset? To boost the entrepreneurial spirit within the office, corporates should choose tools that will help rejuvenate their corporate culture. To achieve this goal, we recommend incubation and sharing resources.

Innovation

If your main objective is to reach adjacent markets with modest change, use tools suited for incremental innovation. We recommend strategic partnerships, accelerators, incubators, and venture development studios.

New markets

Ready to get radical? If your goal is to venture outside your core business, we recommend a tool aimed at seeking out new sectors or target groups. Corporate venture capital investment, M&A, and venture development studios are all great choices.

10

Corporate incubators vs corporate ventures.

Many companies start their corporate venturing journey either by building a single venture or by setting up a venture building machine, aka corporate incubator. To help you figure out which approach is right for you, we’ve defined each tool in more detail and outlined some of their advantages and disadvantages below.  

Corporate incubation

Corporate incubators or in-house incubators operate within a corporate setting. They leverage internal assets, talent, networks and other resources to support intrapreneurs in building new ventures from scratch. The incubator approach essentially creates a framework or program to build a pipeline of new ventures.

Corporate venture building

Instead of building a program (like a corporate incubator), this approach focuses on building a single venture. Teams can immediately cut to the chase, learning as they go and hitting actual milestones a lot faster (e.g. MVP, launch, scale, etc.). It enables teams to start small and gain insights through their own “on-the-job” experiences.

The advantages

Despite their many similarities, these techniques tackle corporate venturing in different ways. Let’s take a look at the different benefits of each approach:

The disadvantages

Now, let’s take a look at some of the drawbacks of each approach:


If your company has a wide range of entrepreneurial experience - starting an incubator is probably the right way to go. Here are just a few of the questions you should consider:

  • Does your company have any corporate venturing experience?
  • Does anyone on your team have experience working with startups?
  • Is there currently any type of venturing process in place (e.g. M&A)?
  • Have you developed any internal innovation projects?  

The more “YES” answers you have, the better the chance that you can start with a larger incubation program.

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How to choose the right entity structure for your corporate venture.

Entity structures can make or break new ventures, affecting their speed, development and success rates. Choosing the right one is a crucial part of the process, but it can be tricky with the seemingly endless list of possibilities (e.g. Spin-outs, spin-ins, business units, etc.).

In this section, we’ll focus on business units and spin-offs since they’re the most common options for companies that want to expand past their core activities to accelerate growth.

What is a business unit?

A business unit is a fully functional unit with its own vision and direction. Typically, strategic business units operate as separate entities while remaining an essential part of the existing legal structure of the parent company.

What is a spin-off?

A spin-off refers to the process of creating a new company that operates separately from an existing one (e.g. through the creation of a subsidiary or joint-venture).

Spin-offs have their own assets and distinct business operations that are no longer under the parent company’s control.

Make sure to carefully examine the characteristics of each entity so that you can make an informed decision about which one fits your company best.

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Companies that used corporate venturing to explore D2C.

With more people than ever shopping online and directly from vendors, making a D2C pivot is a smart move -  and there’s no better time than now to start innovating. Experimenting with your own corporate startup is a low-risk way to test how the D2C business model can benefit your business.

To give you a better idea of how you can use corporate venturing to explore D2C, here are two examples of industry leaders that have done just that:

PepsiCo with PantryShop

‍PantryShop enables users to order snack kits with PepsiCo products like SunChips, Quaker Oats, Gatorade and Tropicana. The kits come in different categories, including Rise & Shine, Protein, Snacking, Workout & Recovery, and Family Favorites, and pricing varies from $29,95 to $49,95. Free shipping is standard, and purchases are mobile optimised to provide a seamless and convenient customer experience.

The initiative was taken from concept to execution in less than 30 days by leveraging Pepsico assets like know-how, inventory, customer insights and technology.

Key Takeaway

Pepsico noticed their customers were having trouble accessing their products when the pandemic started - so they created a way to supply customers directly. The D2C model provided a low-resource structure for them to meet customer needs more efficiently.

L’Oréal with Color&Co

Color&Co is a D2C hair colour brand that connects professionals with customers via live video chat. Each five to 10-minute session is used to create a customised, at-home hair colour, which is then delivered directly to the customer’s door.

Customers usually have two options within the hair colouring space: paying a premium salon price or purchasing an at-home colour kit. Color&Co offers clients a middle ground, so they can enjoy professional guidance even if they can’t afford a salon. It’s also a great alternative to have during a pandemic like Covid-19 or if you simply don’t have the time to make it to the salon.  

Professional stylists who join can supplement their income by offering video consultations on a flexible schedule.

Key Takeaway

Besides creating a D2C channel for L'Oréal, Color&Co also brings expert treatments to the consumer. Under the slogan: “We believe that everyone deserves professional hair colour expertise and individual attention”, they’re democratising hair colouring secrets.

13

What if my corporate venture fails?

We've all heard the statistic that 90% of new businesses fail within their first year for various reasons:

  • Lack of funding
  • Incompatible teams
  • Inadequate validation and proof
  • Inadequate marketing  

Even corporate ventures, which have a significantly higher chance of success due to the smart leveraging of corporate assets, aren’t immune to the possibility - and there are plenty of examples to prove it.

The good news is that each failure delivers an endless array of insights, strengthening your company’s capabilities, knowledge and expertise and helping you avoid detrimental mistakes in the future. In other words, failure can be used productively. The trick is to keep your losses controlled and small by constantly validating various elements using lean experimentation techniques. This approach allows you to fail forward and gain the insights needed to make key decisions: iterate, pivot, or kill it.

14

Corporate venturing as part of your innovation strategy.

Corporate venturing is a cost-efficient and effective way to accelerate growth, create new revenue streams and innovate:

  • Bringing a deeper understanding of customer pain points and preferences.
  • Enabling companies to optimise their business models and offerings.
  • Facilitating out-of-the-box applications for new technologies.
  • Acting as a springboard for the creation of future products and services.

However, despite the vast rewards, it’s not a risk-free process and requires careful planning, preparation and an entrepreneurial mindset to execute successfully. Working with the right innovation tools, techniques and partners can go a long way in helping you overcome any risks and get the returns you’re looking for.

For more details, read what these four leading innovation experts had to say about innovation governance, agile organisations, targets, KPIs, and the very definition of corporate venturing.

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At Bundl, we help companies leverage their unique assets to boost innovation and accelerate growth from within. We’d love to be part of your corporate venturing journey and turn your vision into thriving new revenue streams.

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50 corporate venture examples.

Find out which corporations are driving innovation by disrupting from the inside out.

Download now

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