#19 Post-investment support

Post-investment support, often referred to as Business Development in Venture Capital, is a crucial aspect particularly of Corporate Venture Capital. Although Business Development can be a key driver for startup performance and factor for achieving corporate strategic success, it often does not receive the attention it deserves.

Firstly, it helps startups with scaling and growth, thereby increasing their chances of success. Secondly, it enables the parent corporation to reap strategic benefits, such as the integration of new technologies or business models. Lastly, by providing value beyond mere capital, CVCs can foster stronger relationships with their portfolio companies, positioning themselves as preferred partners for future innovation efforts & new investments.

So, what types of CVC Business Development support exist, and how can an CVC unit establish a framework for effective post-investment support?

1. Types of Business Development Support

The first step is to identify the right type of Business Development support a corporation can and would like to provide. Parent corporations have a wide range of resources & advantages that they can offer to portfolio companies. To maximize the chances of success, it is critical to choose the right support tools and strategies based on the company's current status and future goals:

- Strategic Guidance and Mentorship: Corporations offer deep industry knowledge and expertise that can be invaluable to startups. CVCs can provide strategic guidance on market trends, regulatory and legal landscapes, security protocols, and competitive dynamics. This helps startups refine their business strategies and scale their products more effectively and securely. Regional expertise and the corporation’s network can be particularly valuable for startups formulating their market entry strategies. It helps as well to align the product roadmap to the corporate strategy, which needs to be balanced with market demand.

- Market Access and Customer Base: One of the key advantages a corporation can provide is access to its established sales and distribution networks. This offers startups a quicker route to market, enabling rapid scaling without the need for a large sales force or extensive market development initiatives. Corporations can facilitate introductions to their customer base or supply chain partners, unlocking opportunities that might otherwise remain inaccessible. These connections can lead to early pilot projects, joint development agreements, or supplier relationships, providing startups with steady revenue streams and increased credibility.

- Reputation and Credibility: Partnering with a well-established corporation lends significant credibility to a startup. This brand association can serve as a powerful marketing tool, attracting customers, partners, and additional investors. Consequently, corporate backing can act as a strong signal to prospective clients (client signal) about the startup's reliability and potential.

- Access to Corporate Infrastructure: Corporations with extensive research and development capabilities or established infrastructure can offer their facilities to startups, granting access to cutting-edge technology, laboratories, and expertise. This is particularly valuable for startups in sectors like biotech, energy, or materials science, where high-cost R&D can be a substantial barrier.

2. Structuring Business Development Support

To deliver effective post-investment support, a clear and strategically aligned structure of support mechanisms is advantages. Here are some best practices:

- Define Clear Objectives: Business Development support should align with the corporation’s strategic goals and investment objectives. Establishing a Business Development service framework can help define which services will be offered and which will not (e.g., access to client data, labs, infrastructure, co-selling initiatives).

- Develop Business Development Plan per investment: Not all startups require the same level or type of support. Create customized support plans for each portfolio company based on their specific needs, development stage, and strategic relevance to the corporation. Although these plans can evolve over time, having a shared understanding of the level of support needed is beneficial. For example, a company in its early stages may require more guidance and mentorship, while a more established company may need support in scaling its operations or entering new markets.

- Dedicated Support Team Members: Appointment of dedicated Business Development managers to act as primary points of contact between the portfolio company and the corporation. These individuals should understand the startup’s business and be able to navigate the corporate structure to access relevant resources and establish valuable connections. Their roles and competencies differ from those of investment managers, making it advantageous to have separate individuals for Business Development in the CVC team.

- Identify Internal Champions: Identify and cultivate internal champions within the corporation who can advocate for the startup and drive collaboration. These champions should have a vested interest in the startup’s success and the ability to mobilize corporate resources. Involving these champions in the investment and due diligence processes and considering formal roles, such as board representation, can be beneficial.

- Measure and Evaluate Impact: Establish key performance indicators (KPIs) to assess the impact of post-investment support on both the startup and the corporation. For examples, refer to my newsletter edition on measuring success (strategic KPI section).

- Enhance Reputation and Marketing: Leveraging corporate credibility and reputation is a crucial aspect of signaling reliability to clients. Joint marketing events, press releases, industry conference presentations, and innovation or demo days can all help enhance this credibility.

Conclusion

Business Development is a critical component of Corporate Venture Capital, extending beyond the provision of capital. By leveraging corporate resources, expertise, and networks, CVCs can significantly enhance the growth and success of their portfolio companies. Effective CVC Business Development not only increases the likelihood of successful outcomes for startups but also enables corporations to realize strategic benefits, driving innovation and competitive advantage. Structuring this support with clear objectives, dedicated team members and processes ensures that both startups and corporations achieve their goals, creating a win-win scenario that fuels long-term success.

Happy Post-Investment time,

Joerg

#Corporateventurecapital #venturecapital Startup-Verband BVK Bundesverband Beteiligungskapital Global Corporate Venturing

Disclaimer: The views and opinions expressed in this post and under my Corporate Venture Capital newsletter are solely mine as the author and do not necessarily reflect the official policy, position, or opinion of my employer. Any content provided are my personal views and not investment advice.