Corporate Ventures 101: Traps and patterns

My first article on medium.com is going to deal with patterns I have observed in my daily business with Corporate Ventures (internally funded startups, staffed with own employees). It might help you to avoid typical traps or to address those challenges before they occur.

1. Mindset: You are a Corporate Venture, so it is easier, right?!

No, it’s not. There are some major disadvantages that startups founded within a company typically face. Firstly, and most obviously, you are still part of a big corporation with its possible limitations regarding speed, processes, regulations, hierarchies, and mindset.

Secondly, the cost structure of your team and also the things which you need (servers, services, etc.) will be most likely higher since often you have to use those offered within the corporation. This will lead to extra pressure on your business case.

To be fair, there are some advantages which you should be aware of. For one, you should know best, what the needs of the business units are to tailor a product that fits best compared to an outside startup. Furthermore, it should be easier to get in contact with the decision-maker of your potential client since you are in same the company. However, those two advantages get less and less important since decision-maker make buying decisions upon own research of possible solutions. For instance by simply using search engines, professional networks like LinkedIn, experiences of peers, or reports from companies like Gartner to only name further potential sources. In a nutshell, they do not wait for you to call. They get informed and if you are not on the radar, you won’t be considered (see numbers 3 and 4 to fix that).

2. You are not the only one

Let’s face it, once something is considered as cool “stuff” everybody wants a piece of the cake. Especially, in big companies, you often have the IT department and lots of business units that want to get into the buzzword game (AI, KI, API, platforms, etc.). However, corporates mostly use different innovation vehicles (e.g. Corporate Venture Capital, Accelerators, Innovation Labs) which also leads to more players on the field. Without a clear and coordinated strategy on a corporate level, everybody will likely waste lots of resources to build redundant solutions without benefiting from the economy of scale and shared resources which are obvious advantages of large corporations.

3. Strategy, strategy, strategy … did I mention strategy?

As time has gone by, coperates will come up with some kind of strategy, which intention is to align the business needs and hence to orchestrate the technology needed. At this point, it is necessary for your Corporate Venture to be visible and to be the recognized expert in a specific field. Hence your sales and marketing strategy should be targeted to reach this goal and fit the overal strategy.

4. Sales & Marketing … Yapp … you got to do that!

I often see motivated teams with profound knowledge about their field of expertise. However, when it comes to actually sell the product, skills are lacking. When setting up a Corporate Venture one should therefore also staff sales and marketing experts who have a profound network within the corporation. Make yourself familiar with social selling as this will help you to generate leads for your product or service. Leverage on #2 on this list by setting up a community to gather interested peers across your corporation to exchange ideas and know-how about the field of work. This will help your corporate-startup to be recognized as experts (see #3) and will also lead to more opportunities by networking.

5. Be fast & prove your point

Speed is essential. Unfortunately, you are working in a big corporation. Be aware that sales cycles of 6 months or more are not unusual, and often neglected in your business case. To speed up this process, you must understand why it takes so long:

• A potential customer should be able to understand, what his/her benefits are (theoretically). Use ROI (Return of Invest) calculations with sound assumptions. You should draft the ROI in cooperation with the future customer, which leads to more credibility of the numbers. Keep in mind, that the benefits of implementing a new product or replacing an existing one must more than outweigh the costs of implementation.
• A potential customer should be able to actually experience what the benefits are (practically). Therefore you need to prove your point during a Proof of Value (actually using your product in realty for a specific amount of time to validate assumptions and to proof that actual value has been created), which takes up time.
• Be aware of critical road blockers from a corporate point of view: Did you involve the workers’ council, data security committee, legal department to check for potential issues? Do this as early as possible.
• A budget needs to be allocated. If no innovation budget is available, this might take a while, since corporations plan ahead losing agility in favor of stability. Hence, you should be aware of the budget planning cycles. Be aware of financial limits that force corporations to pursue a tender which potentially also takes up many months.
• Understand the buying center of your opportunity. Who is the gatekeeper? Who is the person with the money? Who are the users? Who is your champion? You need to understand those roles to gain traction.

There are many more things to consider. It depends on your industry, the majority, and the culture of your corporation. Hopefully, this list will help you, to be prepared as a Corporate Venture.