Steer Clear of Corporate Venture Capital Pitfalls

Big companies and risk capital can be awkward partners. Here’s how to get corporate venturing right.

- Ilya A. Strebulaev and Amanda Wang

NO ONE NEEDS TO BE TOLD HOW crucial innovation is to a business's survival in a constantly morphing landscape. Corporate venture capital (CVC) is one of three main innovation mechanisms that large companies now deploy, along with internal R&D and innovation M&As. In recent years, CVC units have become increasingly important across geographical borders, industries, and technology sectors, helping companies to stay nimble and forward-looking- and to create new growth engines. In 2022, global CVCs invested almost $100 billion in about 5,000 investment rounds of VC-backed companies.¹ Over 100 new CVCs were created that year alone.²

But even though CVCs kick off with great fanfare and optimism, many, if not most, fail to achieve their objectives. Often, they don’t survive the first change in CEO or make it to their 10th birthday. Over the past several years, many companies have closed, slowed down, or redesigned their initiatives. A third of all active CVCs were mothballed or shut down in the past three years. One prominent venture capitalist, Fred Wilson, has said that for corporations, investing in companies rather than acquiring them outright makes no sense.³

Why do CVCs so often struggle, and how can you ensure that yours thrives and becomes a major innovation tool? One of us (Ilya) works with business leaders around the world on applying the Silicon Valley venture mindset to large companies’ corporate innovation and CVC strategies and has discovered a stark truth: A lot of companies don’t actually understand how CVCs should be designed, monitored, and evaluated. To shed light on this chaotic world, we conducted confidential, in-depth interviews with leaders of 164 CVCs around the globe about their decision-making processes and the factors behind their successes and failures.⁴