Working with Global Corporate Funds
As an entrepreneur looking to scale your company to the next level, you may be considering working with corporations for both investment and strategic partnerships. Many corporations invest significantly in innovation through internal efforts such as R&D and external efforts to identify and build strategic partnerships with startup companies. One approach to building strategic partnerships is by investing in startup companies typically through their Corporate Venture Capital (CVC) entity or innovation division. So who are these corporates? Global Corporate Venturing (GCV) has identified that since 2011 there have been over 6,200 corporations that have invested in startup companies. In 2021 alone, CB Insights had identified 221 new Corporate Venture Captial (CVC) entities being formed.
The Role of Corporate Venture Capital in Saudi Arabia
In recent years, Saudi Arabia has seen the start of a flourishing corporate venture capital industry. Major corporations have set up their first corporate venture capital (CVC) arms with strategic and financial missions to invest in the tremendous growth opportunities within the region. Investment firms like STV Ventures, backed by the Saudi Telecom Company, MBC Ventures, backed by the MBC group, and Saudi Aramco Energy Ventures, backed by Saudi Aramco, have taken the first steps to establish a Corporate Venture Capital ecosystem within Saudi Arabia. This is a great sign for the future of the KSA startup ecosystem as CVCs are very powerful engines for the country’s innovation ecosystem. It is important for other corporations to follow suit, as Corporate Venture Capital firms play a pivotal role in supporting startups through not only providing capital, but pathways to achieve the commercialization and validation of new products. As you explore these options, this blog post will share insights to better prepare you to navigate the world of corporate innovation and venture capital.
With so many potential CVC organizations, how do you know who to approach? Most CVC groups were created to achieve specific objectives, it could be focused on a specific industry, sector, technology, geography, or anything really. The best way to start is to see if the CVC has a website. A well-prepared site would talk about their fund thesis, areas they invest in, what target stages, and a way to contact them. You should also check out their other web and social presences to determine if it is a fit for your company.
For example, Salesforce Venture’s website starts with the tagline “100% invested in enterprise cloud”. Their intro statement is: “We’re Salesforce’s investment arm focused on creating the world’s largest ecosystem of enterprise cloud companies. Since 2009, we’ve formed partnerships and helped accelerate the growth of over 400 technology startups.”
As an entrepreneur looking to raise strategic capital from CVCs, spend time identifying the organizations that are better aligned with your company to increase the chances of having a meaningful first meeting.
2. Most CVCs look for both financial and strategic returns
Much like VCs, CVCs look to invest in companies that have the potential for financial returns. However, unlike VCs, many CVCs add an additional hurdle as they look for strategic returns as well. How strategic return is defined and measured varies from one firm to another.
If we look at Intel Capital’s website, their tag line is “Investing in the future of computing” and states that “Intel Capital is uniquely positioned to help build the companies of tomorrow. Our investment team is backed with deep domain knowledge and the resources of Intel to assist companies in their paths to success.”
Their tag line mentions that they back startup companies that are developing technologies, perhaps products and services that enable the future of computing. Combined with the bench of Intel’s talented technical staff, a strategic return may be to support their portfolio’s capabilities to accelerate the adoption of Intel’s 8high-performance computing products in new markets. Perhaps supporting their portfolio company’s growth has nothing to do with Intel’s products. As technology evolves and markets shift, what strategic returns mean will also be evolving. Understanding the CVC’s priorities would be an important topic to uncover.
3. Positioning your pitch
The process of engaging a CVC is very similar to engaging with a Venture Capital investor. It’s important to send curated cold outreach after conducting research on the “thesis”, vision, or objectives of the firm. It is also important to attend relevant conferences and events to get visibility with the firm. Now that you have a high-level understanding of a CVC, and how to engage them, how do you pitch them? Is it any different than meeting with a VC? The answer, unfortunately, is that it depends. First and foremost, if you are pitching the CVC, then treat it like a VC pitch. Own your narrative, know your business, demonstrate market readiness, have your financials and KPIs ready. What differs is driven by the other people who may be in the room. Is there someone technical? Perhaps someone on the business side who knows the market or owns their customer base? These members may have in-depth knowledge about the problem you’re tackling, deep technical expertise, and/or market experience. Your pitch will need to convince them that your company has the expertise and a moat to do what they can’t. Explain how your solution can be complementary and supportive. How you are dominating a market where they don't have much traction. Whatever that superpower is, a slide or two that articulates alignment will help illustrate the strategic value you bring to the table.
…and then you got rejected, is it over?
You had a solid breakfast, your pitch is on point, you’re mentally prepared to answer any curveball question. You have your first meeting. You pitch. The room is full of energy. As you walk out you feel like you nailed it! …only to come back to a generic rejection email. Ugh…
Does this mean it's over? Well, perhaps from an investment perspective (for the time being). Perhaps they were not ready to engage at this moment. Maybe you were a bit too early. Maybe they wanted to see more traction. Maybe they just didn't get it. Whatever the reason, remember that some corporations employ tens of thousands of people and there may be other groups that would be interested in your solution. If your contact is supportive, can they become an ally to help navigate internally? Even without an ally, can you further identify the right business groups to sell into? Now that you have a deeper knowledge of the value proposition which speaks to this organization, can you continue to build a relationship with these contacts? It may be to your advantage to keep both the CVC as well as the business units in the loop. Provide periodic updates on traction and news. As new trends emerge, the priorities of the CVCs, as well as the business units, will evolve which may raise their interest to engage.
In this blog, we reviewed the importance of identifying the right partners or champions in an organization, understanding the goals of the organization, and how to position your pitch.
You now have several tools and tactics in your arsenal that you can use to secure investment or partnerships from global corporations or investment firms. These strategies can also be crucial when seeking investment from global Venture Capital firms.