Why Corporates Are Betting Big on Venture Capital?

"Corporate Venture Capital is not just about funding; it's about strategic alignment, innovation, and tapping into new growth opportunities. It's a vital tool for corporates looking to stay ahead in a rapidly evolving market." — Mark, Director @ Dream VC

Summary

Our recent webinar on Corporate Venture Capital (CVC) highlighted its strategic importance and impact for corporates in today's dynamic business landscape. The session covered how CVCs drive innovation, attract talent, and keep companies competitive. Our panellists shared insights into the ideal characteristics of a CVC fund and the motivations behind adopting CVC strategies. We concluded with a call to action for corporates to leverage CVCs for long-term growth and success.

Speaker Highlights

We were privileged to have an impressive line-up of speakers who shared their expertise and insights:

- Yassine Laghzioui, CEO at UM6P Ventures

- Davis Cook, Chairman at RIIS

- Tramayne Monaghan, Chief Ventures Officer at Next176

- Nurken Rzaliyev, Investment Director at inDrive New Ventures

Opening Remarks by Mark

Mark kicked off the session with an insightful overview of the global rise of CVCs. He highlighted key trends and regional developments, pointing out how family-owned investment companies and corporate venture capital arms in the Middle East are becoming prolific investors, with notable examples like Raed Ventures and Wa’ed Ventures. In Japan, over 300 corporations are actively making minority investments in startups, particularly in telecommunications, real estate, and entertainment sectors. Latin America has also seen a surge in tech unicorns, with many companies developing regional CVC strategies focused on fintech, sustainability, and healthtech.

Observations on the Current State of Innovation in Africa

A survey by the African Private Equity and Venture Capital Association (AVCA) revealed that over 70% of fund managers in Africa see CVC as a key driver of innovation and job creation.

Mark and Yassine emphasized the growing importance of CVCs in Africa. They discussed the increase in innovation and R&D funding across Africa and highlighted strategic moves by both African and global corporations to capture innovations, acquire top talent, secure market share, and achieve financial returns in the rapidly growing VC market.

Ideal Characteristics of a CVC Fund

The panel outlined a wish list for a world-class CVC fund, drawing on their experiences with existing initiatives. They suggested that an ideal CVC would:

- Align strategically with the parent group

- Operate independently with a dedicated, well-trained CVC team

- Function on a patient capital basis with a multi-year mandate

- Have access to the parent corporation's resources when needed

- Be well-connected with the wider investment ecosystem

While this ideal is challenging to achieve, the panel stressed the importance of striving towards these characteristics for successful CVC implementation.

Advantages of CVCs for Corporates

CVCs enable corporates to tap into the innovation potential of startups, accessing cutting-edge technologies and business models without the high costs and time associated with in-house R&D. Nurken Rzaliyev from inDrive shared how they explored all possible expansion strategies globally and chose CVC to align with their strategic goals, demonstrating the value of CVC in supporting global growth.

Engaging with the startup ecosystem through CVCs helps corporates maintain a competitive edge, offering early access to new technologies, insights into emerging trends, and the ability to influence innovation. Startups also serve as talent incubators, allowing corporates to attract high-potential individuals who bring fresh perspectives and skills.

Investing in startups helps corporates stay informed about disruptive trends and market shifts, crucial for strategic planning and relevance. Diversifying investment portfolios through CVCs spreads risk across multiple ventures, particularly beneficial in volatile industries. The entrepreneurial spirit of startups can positively influence corporate culture, fostering innovation, agility, and risk-tolerance. CVCs also help build strong ecosystems of partners and collaborators for co-innovation, joint ventures, and strategic alliances. Many startups focus on sustainability and social impact, and through CVCs, corporates can support and scale these initiatives, aligning with broader corporate social responsibility goals.

Constraints of Conventional R&D or Internal Innovation

Davis Cook from RIIS explained that Corporate Venture Capital is not a replacement for all R&D but a strategy that complements internal R&D. This approach can drive significant value back to the group, with Mark providing examples of successful implementations in the FMCG sector.

Motivations Behind CVC and Why the Timing is Right

Nurken described how the CVC strategy emerged as a solution to maintaining global growth rates for inDrive as they rapidly expanded across markets. This strategy proved essential in addressing core growth questions.

Each speaker brought a unique perspective on the evolving landscape of CVCs, discussing successful case studies, strategic investment approaches, and the broader impact of CVCs on corporate innovation and market dynamics.

Conclusion and Future Directions

Our webinar underscored that Corporate Venture Capital is a powerful tool for driving innovation, achieving strategic goals, and maintaining competitiveness. By leveraging the agility and creativity of startups, corporates can ensure long-term growth and success.

Dream VC is committed to professionalizing venture capital investing through education, training, and guidance. This webinar followed a successful CVC unconference co-hosted by Dream VC and AfricArena, bringing together CVCs and VCs to exchange expertise. This episode is part of a series delivered by the SACAAS Consortium, composed of Dream VC, ANZA Capital, RIIS, and SA Innovation Summit, in collaboration with JSE Private Placements. The consortium presents a compelling series of webinars focused on the transformative potential of CVC to drive value and financial benefits for South African companies and multinational corporations with in-country presence.

Look out for more events, webinar episodes, and research to help aspiring corporate and strategic investors enter the startup or VC ecosystem in Africa and emerging markets. This effort is part of Dream VC's broader mission to raise awareness of the merits of CVC, as evidenced by organizing panels and workshops at key events like the Africa Early Stage Summit and GITEX Africa.

Thank you to all our speakers and participants for contributing to this insightful discussion. Stay tuned for more events and discussions on this topic.

Learn more: https://www.dream-vc.com/