Maximizing Strategic Returns: When CVCs Stop Behaving Like VCs

CVC evidently stems from VC and started as a copy-paste of it. In fact, CVCs are often referred to as the "investment arm" of corporations, assuming that their role is to simply deploy capital and chase exits - as would any text-book VC. To this day, whether in-house or as an independent subsidiary, many CVCs still behave as if they were traditional VCs and even go as far as being staffed like VCs (a lean team of analysts, principals, and partners) perfectly suited to write cheques and chase exits.

This is all well and good as long as the corporate headquarters or parent (a.k.a. the Mothership) expects nothing more than financial returns on investment. But as soon as the importance of STRATEGIC RETURNS starts to outweigh that of financial returns, such CVCs tend to enter a zone of turbulence.

Here's why.

Same asset, different expectations

While both VCs and CVCs invest in the same “asset” (a.k.a. Startups), what they expect in return could be totally different and, thus, require a totally different approach, team, and set of activities.

A typical VC would invest in a startup, expecting exponential growth until a lucrative IPO, acquisition, or secondary market sale. In contrast, a CVC with a strategic mandate would invest in the same startup, not primarily eying an exit, but rather the strategic value it brings to the Mothership and its corporate business units. This means gains, savings, efficiencies, know-how, innovations, market access, user/consumer data, and/or insights that enhance the corporation's competitive edge and offerings for current or future endeavors. As a result, ROI for strategic CVCs gravitates more towards future business creation and profits rather than flipping ownership stakes.

Moreover, this strategic value isn't unilateral; it is exchanged. There is a strategic value exchange which is supposed to take place between the corporation and the startup to justify and underpin their commercial relationship, including investment.

Therefore, for a strategic CVC, a startup's financial exit could be considered as a bonus. The ideal exit would be the corporation itself acquiring the startup, even though in some cases, the corporation may also be extremely satisfied with just being the startup's enterprise client or strategic partner. Of course, making money from an exit and then using those returns to keep the lights on or add more to the investment fund—like an evergreen fund—can definitely be part of the CVC’s operating model, but not its main purpose.

This realization is at the root of tectonic shifts happening in the VC/CVC world.

Growing Promises of Strategic Returns

First, on the traditional VC side, funds are still very eager to capture commitments from corporate GPs and LPs (particularly in Japan where corporations are sitting on trillions of dollars). These VCs toil to seduce corporations by selling them promises of strategic returns on investment (SROI). But here's the kicker: while typical VCs may comfortably thrive by signing cheques to startups, giving them occasional advice, and making occasional intros to other investors and corporates (often called "value-up"), that’s only scratching the surface of what delivering lasting and substantial SROI to corporates is all about.

In talking with corporate stakeholders, I realized that it is not uncommon for corporates to feel shortchanged by VCs and accelerators claiming to offer them big SROI in exchange for lots of money. All too often, these firms offer little more than “Intros & Hope” – as in introducing corporates to a few startups and hoping for “synergies” to magically happen. But synergies don’t just manifest after a Demo Day intro or a Zoom call. Instead, both sides end up uncertain about what comes next. For real SROI to come through, there needs to be a structured, methodical, and systematic approach that shepherds this relationship, helps startups and corporates better engage, confirm their SROI potential, and work together towards building these synergies. It takes time, resources, and well-designed programs to get there, but that’s what makes it work.

The reality is that most VCs are too lean and not incentivized to spend time chasing corporate business units, securing corporate resources and approvals, co-designing strategic fit validation programs and proof-of-concepts (POCs) to nurture these strategic returns. In short, maximizing SROI takes more than cheques, intros and hope, which is where VCs promising consistent and significant SROI to corporate GPs/LPs tend to fall short.

Meanwhile, on the CVC side, there is a reckoning that simply mimicking VC behaviors is no longer enough to justify their value and existence, which is why many CVCs have been re-strategizing or shutting down. One of the main motivations to start a strategic CVC is to take stock of innovation, take part in disruption instead of passively witnessing it while getting disrupted. However, taking part in disruption goes beyond signing cheques to disruptive or innovative startups. It implies collaborating with them, then possibly integrating them in case of strong strategic fit and sustained SROI. Please note that I intentionally didn't use the terms "INVESTING" in them, then "ACQUIRING" them, because those two things are just financial transactions - means to an end - which is what tends to cloud the vision of CVCs trapped in finance groupthink. The big picture for strategic CVCs (and VCs wanting to be strategic) should go well beyond these financial transactions, which is at the core of what distinguishes strategic VC from traditional VC.

Evolving from Finance Groupthink

Finance Groupthink is what makes VCs and CVCs view?startup engagement through a purely transactional lens, such as treating startups as assets (rather than partners).

To their biggest surprise, with all their influence and power within the VC space (historically and because money talks), finance professionals can become very uncomfortable with the reality that CVC isn’t just about them, their money and financial transactions (shocker). While financial transactions remain an essential function of CVC, they are certainly not the be-all and end-all. And yet, despite this realization, many “strategic” VCs and CVCs still appear trapped in finance groupthink, unable to broaden their horizons, assemble the multidisciplinary team and cross-functional system capable of maximizing SROI.

On one side, we have the VC-like CVCs: these are the ones married to traditional VC practices. They often have a vague idea of what SROI truly means, or they’re simply not set up to deliver it. Since financial returns are what they know best, they double down on those to show results to management, focusing on transactions—due diligence, deal structuring, and the weekly ritual of pitching deals to the Investment Committee. Occasionally, to account for SROI inclusion, they’ll tack on a vague job description bullet point like “support portfolio companies,” which leaves to figure out what that actually entails.

On the other hand, we have the "Awakened CVCs." These are the ones that either recognize the need for SROI on their own or have been tasked by the Mothership to start delivering strategic value. These CVCs are embracing a new model, forming two teams within their units: (1) an Investment Team that operates much like a traditional VC team, focused on financial transactions, and (2) The Business Development Team (sometimes dubbed the Business Acceleration Team, or Portfolio Success Team, or The Platform Team, or Corporate Venture Business Development team, etc.) which, in essence, is meant to help deliver most of the SROI, usually post-investment, including collaborations with corporate business units (sometimes referred to as “venture clienting” or “portfolio success management”).

A great example of this is the model proposed by the Global Corporate Venturing (GCV) institute, which provides a solid foundation for CVCs seeking to activate their strategic side.

Notable CVCs are making observable efforts to diversify their teams, believing that creating a 'Strategic Collective' within the CVC unit will allow them to achieve both financial and strategic returns, in THEORY. In practice, however, results vary, depending on the actual multidisciplinarity achieved within the team and their approach to SROI.

Assembling the Right Unit

Dividing the CVC unit into two teams doesn’t immune against tunnel vision or silos, especially if there are no programs tying those functions together within a cross-functional streamlined system.

Silos pop up when the CVC acts like a lone wolf, keeping itself separate from the corporation to dodge the “red tape” of the Mothership and invest at will. Ironically, the greatest value proposition that a CVC can offer to a startup is its ability to unlock all the Mothership’s resources for its portfolio companies. Therefore, from an SROI perspective, keeping the CVC too isolated from its parent can actually be counterproductive, often due to short-term, finance-first thinking.

This is why it’s crucial to have “corporate insiders” on the team who know how the Mothership works. But even that alone isn’t enough, which brings us to the next problem: tunnel vision.

Tunnel vision happens when both the Investment and Biz Dev teams get too narrowly focused. You end up with investors on one side and tech experts and insiders on the other. While this is a step up from having only finance professionals, it can still lead to a narrow outlook. For example, engineers may excel at creating new products and features but struggle with commercialization. Similarly, insiders might be limited by their internal perspective, while the whole purpose of CVCs is to get inspiration from innovations happening outside the company. A team of investors, engineers, and insiders might still fall short when it comes to effective stakeholder and ecosystem engagement, partnerships and resource mobilization, designing and running end-to-end startup and open innovation programs.

While there is no one-size-fits-all in team diversity, a balanced CVC unit, ideally, would have a mix of investment, entrepreneurship, business development, technology, startup support and venture building, stakeholder engagement expertise. Simply put:

• Investment: Ensures the CVC isn’t partnering with a startup that’s a great fit strategically but won’t last (poor financial health, management issues, or limited growth potential). And speaking of not lasting - make sure that the investors on the team are obsessed by vocation, not by carry (another thing that finance groupthink might complicate).
• Entrepreneurship: Provides empathy for founders and their journey, allowing the CVC to engage with startups as peers rather than from a high horse with unrealistic expectations.
• Business Development: Helps avoid stale relationships and startups that have high ROI but low SROI (unless part of a deliberate portfolio diversification strategy), making sure the partnership generates tangible new business opportunities.
• Technological Expertise (engineering, R&D): Allows the team to see through technical jargon and spot startups that may over-inflate their technological prowess and look good on paper but aren’t a strong technical match.
• Startup Support (venture building, incubation, acceleration): Ensures that the team can design and run programs that foster startup collaboration, covering everything from recruitment and PoCs to mentorship and post-program support.
• Stakeholder Engagement: Keeps internal stakeholders—departments, managers, and board members—involved and invested in the system, mobilizing them to allocate resources for both pre- and post-investment activities (making sure your value proposition goes beyond money). This expertise also helps position the CVC and corporation attractively within the ecosystem, bringing in high-quality startups and external stakeholders.

The good news is that most CVCs can build this kind of diverse team, or network of teams, internally with the right vision, buy-in from management, and committed employees across the corporate network. In contrast, traditional VCs may have to search for external financing or partners due to their lean business model and 2% management fee, making it challenging to cover all key strategic functions internally.

That said, whether in-house or outsourced, it’s not just about having the right pieces, but about how these pieces are made to work together.

SROI: Think System, Not Process

It’s surprising to see how many CVCs still think of SROI as just another process—and even worse, it’s often treated as an afterthought that only kicks in post-investment. I've seen many CVC flowcharts and frameworks. In many instances, they show a Business Strategy team at HQ creating the “corporate strategy,” which then gets handed off to the investment team, who sources and invests in startups. The “output” from those investments is then fed back to the Business Strategy team to explore possible collaborations with the portfolio. While this setup sounds organized, in practice, it has its share of issues.

For one, this process is siloed. It feels like a conveyor belt of isolated tasks that are passed from one team to the next; like a bureaucracy out of what I like to call “the Bento Box Framework” commonly encountered in Japan, where all ingredients are nicely placed in their individual compartments but don't touch. It looks pretty and organized, but barely designed to collaborate, instead pass on work to each other.

Secondly, there’s little room for feedback or cross-functional work between the Investment and Biz Dev teams to work together on parts of the system. The Biz Dev team is left to put up with the deals made by the Investment Team and figure it out. This setup feels like the difference between having a multi-cultural team and an inter-cultural one.

While following a process is necessary, it's equally important to ensure that it is collaborative, not just sequential. Team members are not just meant to interact but collaborate, which requires deeper forms of engagement beyond meetings.

This is where Programs gain their strength: they create collaborative opportunities that engage, mobilize, and establish feedback loops among stakeholders, especially since maximizing SROI is an iterative process that will take time to sophisticate and expand to cover the full breadth of the corporation’s business units and value proposition.

A system, unlike a process, is a collection of interconnected components or elements that work together as a complex whole. Systems can include multiple processes and can be characterized by their structure and behavior.

Approaching SROI generation as a system prevents it from being siloed, or even worse, ad-hoc or a financial investment afterthought.

SROI as A System Powered by Programs

The moment SROI is embraced as a system, at least two basic principles of Systems Thinking apply:

Principle 1: Holistic View. Understanding that a system requires looking at the relationships and interactions among its components, rather than just the individual parts.

In other words, to maximize SROI, strategic VCs and CVCs need to be less self-centered and recognize themselves as a piece of a broader system – say an Open Innovation system – where components (investment team, biz dev team, corporate departments, business units, etc.) are connected by programs which make them collaborate with each other. Programs are key to the System because they activate it, provide guidance, structure, methodology, and tools to ensure that internal and external stakeholders know when and how to intervene, and what to do once sitting at the table. Whether to source startups more effectively, validate strategic fit pre-investment, or exchange value with startups post-investment, programs are the activities that will mobilize and incentivize internal and external stakeholders to contribute time and resources to the SROI system.

Programs also generate institutional knowledge and practices that can be iterated, improved, and expanded over time. Essential since SROI is meant to be a long game that stretches beyond the 5–7-year VC investment cycle.

Principle 2: Interdependence. Changes in inputs can significantly affect outputs and the overall behavior of the system.

This means that the actions—and mostly inactions—of CVCs pre-investment can directly affect the quality and nature of investment outcomes (including Investment Committees) and post-investment outcomes (i.e. portfolio success, integration).

That is to say that strategic VCs and CVCs must seriously consider the nature and quality of their pre-investment activities – or lack thereof – to ensure that they are maximizing SROI from the get-go while de-risking investment and post-investment pitfalls that could erode those returns later.

Maximizing SROI Starts Pre-Investment

From investment committees (ICs) rejecting too many deals due to a lack of perceived strategic returns, to portfolio success management teams struggling to determine how to support invested startups, some of these common investment and post-investment pitfalls can be de-risked thanks to well-designed pre-investment activities, which make pre-investment programs the foundation of SROI maximization.

Unfortunately, pre-investment activities are often taken for granted by VCs and CVCs which tend to adopt an ad-hoc approach by default (another traditional VC “bad habit”).

1) Inefficient and ineffective sourcing

While it’s OK for the Investment Team to source startups in the traditional way—such as foraging the internet, getting referrals, or attending demo days and events—this approach often fails to optimize your team’s efforts, reveal concrete SROI pathways, and improve IC and post-investment outcomes.

Attending events or demo days (whether in person or virtually) can be useful to some extent, but not that efficient to generate high-quality and consistent deal flow that aligns with your thesis and corporate objectives. This is especially true since many startups funneled via referrals, demo days or events can be irrelevant given that you have no control over their selection criteria and process, or programs they undergo to qualify them for partnerships or investment. Events can also be unpredictable (we never know who will attend beyond organizers and speakers) with the risk of spending significant time and energy for limited results.

Moreover, operationally, this ad-hoc approach can create inconsistent deal flow, often misaligned with your internal processes and reporting cycles (e.g., board meetings, investment committees). This can hinder your ability to show results to decision-makers on time and cause delays in critical investment and post-investment steps such as deal processing, securing internal buy-in and approvals, and securing resources for founders short on time.

Hence, to jumpstart SROI, it is imperative for strategic CVCs to add more intentionality and structure to their pre-investment approach, particularly in how they engage with the ecosystem, source and qualify startups. By taking ownership of these activities (rather than relying too heavily on third parties and ad-hoc outreach), CVCs can systematically attract and qualify better leads with greater consistency, precision and efficiency, using criteria and timelines aligned with their investment thesis and corporate operations, but most importantly, generate inputs of greater value for SROI maximization.

A Strategic Fit Validation Accelerator (SFVA) is a perfect example of adding value to pre-investment activities. It brings together all relevant parties in a planned, controlled, and recurring program, helping generate foundational insights that can be leveraged by the Investment and Biz Dev teams to drive SROI, while building institutional knowledge that can be preserved and perfected over time. As a pre-investment program, it is designed to not only attract but qualify the most suitable startups for strategic collaboration and investment based on your terms, timelines, and selection criteria. Above all, it produces concrete EVIDENCE (not just assumptions) and clearer SROI pathways which can be used to improve IC outcomes and mitigate post-investment risks.

2) Overcoming IC Rejection: Evidence over Assumptions

Investors at strategic CVCs can attest to the frustration of seeing a perfectly packaged investment deal getting rejected by the IC due to a perceived lack of SROI.

When dealing with an IC obsessed with maximizing SROI, the CVC must shine a spotlight on strategic fit and collaboration potential to sway the jury. The issue often stems from the nature of VC itself, which typically relies on assumptions—like projected revenue growth, user acquisition, market share expansion, and exit multiples. For financial returns, these assumptions come dressed up in numbers and fancy financial models, giving everyone a warm, pseudo sense of confidence.

Unfortunately, since SROI assumptions don’t come naturally with slick math, investors tend to be left with lighter qualitatives, arguing that an investment aligns with the fund’s strategy, sector focus, and portfolio, which is not enough for an IC that has become highly strategic. To get through to them, investors need to come armed with more compelling arguments. ?

This is where SFVAs come again to the rescue.

SFVAs are designed to further qualify startups by conducting small-scale, short-term Proof-of-concepts (PoCs) with relevant corporate business units where strategic fit is assumed. These pre-investment PoCs generate data, findings, and insights that turn assumptions into evidence, validating strategic fit just as financial models validate projections. By adding this “practical due diligence” to their standard due diligence process, the Investment Team can build a far more powerful case for the IC.

With an SFVA, strategic fit isn’t just theoretical—it’s demonstrable. There’s a big difference between telling the IC 'We believe this startup could collaborate with X business unit' versus 'We tested the collaboration, and the initial results are very promising.' This shift from assumption to evidence of strategic fit and SROI potential can significantly improve the likelihood of the IC recognizing the deal's strategic value.

Beyond that, it also helps mitigate post-investment regret and enhances the Strategic Team’s ability to support the startup post-investment.

3) Mitigating Post-Investment Woes

For a strategic CVC, few things are more frustrating than investing in a startup that seems like a perfect match on paper, only to find it’s a poor match in practice—especially when the Mothership takes notice. Just because a startup operates in the same industry doesn’t guarantee it will be a valuable partner. After investing in a startup, what if the team uncovers that the data produced by the startup is useless? What if its technology can’t integrate with the corporation’s systems. In such cases, the CVC risks being wedlocked with a portfolio startup offering minimal strategic value, which can cause scrutiny from the Mothership and disappointment from the startup.

Unlike traditional VCs, which can afford to spray-paint capital, trust pareto and rely on a few top-performing companies to balance out their portfolio, strategic CVCs operate differently. With their mandate to generate strategic value, rather than purely financial value, they tend to maintain smaller, more focused portfolios and tend to make larger, more resource-intensive investments. Therefore, making investment or partnership decisions based on assumed compatibility - rather than proven compatibility - exposes CVCs to greater post-investment risks.

Furthermore, when the Investment Team hands over a new portfolio startup to the Platform Team with little to no prior involvement, a lot of time is wasted on reverse-engineering the deal post-investment. The Platform Team has to formalize the strategic reasoning behind the investment, figure out potential value-exchange pathways, and identify and mobilize relevant internal resources and business units. In some cases, they may even fail to find a clear path forward, which is even more problematic.

Again, this is where the SFVA comes in handy.

Since the SFVA is designed to involve the post-investment teams early and more meaningfully in the startups’ selection, qualification, and PoC processes, it allows them to gain a deeper understanding of the startups’ needs, compatibility with the corporation, SROI potential and pathways, and all this prior to committing serious capital. By the time an investment deal goes before the IC, the strategic fit is no longer just on paper, and the support teams are already aligned and good to hit the ground running with a clear roadmap.

And even if investment isn’t the best route, the SFVA also reveals other valuable pathways of engagement outside mere investment, such as becoming an enterprise client, a supplier, onboarding the startup as a vendor, or other forms of strategic partnerships. The SFVA basically helps clarify the kind of commercial relationship the corporation can develop with a startup before committing significant resources. Investment, after all, isn’t the end goal; it’s a means to support strategic objectives. In some cases, maintaining a commercial relationship without an equity stake can deliver the most value.

Which begs the question: why are some CVCs still investing in startups without first validating strategic fit? An investment in a startup should never drive the decision to collaborate; instead, proven collaboration potential should drive the decision to invest.

For strategic CVCs, the guiding principle is clear: make investments only when SROI is validated and double-down when consistent, not before. Investment is a means to an end, not the end itself. It doesn’t initiate the SROI; it supports it.

Conclusion

The journey towards maximizing Strategic Returns on Investment (SROI) for CVCs requires a fundamental shift from traditional VC practices. It is essential for CVCs to move beyond finance groupthink and embrace a more holistic, systemic approach that integrates diverse skills and perspectives conducive to maximizing SROI.

By establishing a cross-functional, streamlined system that brings intentionality, structure, optimization, and consistency—and actively engaging various stakeholders through well-designed programs across the SROI value chain (from pre- to post-investment)—CVCs can make SROI a core objective from the outset, not an afterthought.

While this approach may feel daunting or unfamiliar to pure finance professionals, starting small, perhaps with one business unit, and expanding based on proven success can help build a robust case within the company.

CVCs can truly leverage their unique position as a strategic investor, unlock their full value proposition and contribute much needed value across ecosystems, while maintaining a competitive edge in both mature and emerging markets—redefining what it means to be an “investment arm”.

This has been therapeutic. I hope this ends up being helpful.

Happy to talk to anyone passionate about maximizing SROI and corporate venturing!