Can Big Companies Become Successful Venture Capitalists

Abstract

Maybe, but first they need to understand what makes the model work Four good reasons to try... pick only one It's hardly surprising that big companies are attracted to the venture capital (VC) model for new business development.(*) Its track record is enviable: the industry as a whole outperformed the SP to look for business concepts that will excel if the industry evolves as they believe it will; and, most important, to insist on the presence of a strong management team. Although corporate managers often have just as clear a strategic focus in their core business, they typically run into greater ambiguity with venture programs. Their biggest challenge is to establish clear, prioritized objectives. Simply making a good financial return is unlikely to be sufficient, while other objectives - acquiring new technologies, entering new markets, reenergizing corporate culture - often compete for attention. Moreover, corporate managers are unlikely to receive the regular exposure to new ideas that VC firms enjoy, and the criteria they use to evaluate ideas are often intolerant of the risks inherent in launching a new type of business. Willingness to weed out the losers... Venture capital firms view each funding decision not as a project approval but as an option on future decisions. They reduce their exposure by investing in small increments until the key risk factors are resolved. With only one in ten ventures becoming a hit, VC firms manage their portfolios ruthlessly, weeding out likely losers early. …