What is the difference between a venture capital and a corporate venture capital?

What is the difference between a venture capital and a corporate venture capital?

In the world of corporate innovation, we usually talk about concepts such as venture capital (VC) and corporate venture capital (CVC). Although the first is more popular and its characteristics are better known, the second is a hot trend that shares some characteristics, but also presents differential traits. We explain the difference between the two concepts.

What is a venture capital (VC)?

Venture capital (VC) is a financial operation that consists of a series of private investments. These financings are carried out through equity stakes in small companies or startups that have a lot of growth potential and a high level of risk. As it is an investment through shares, the investing entity receives in exchange a small percentage of the company.

Venture capital is one of the most common and popular forms of financing in the entrepreneurial world, since these startups don’t usually have access to other types of financing, such as a bank loan.

🙋 Agents: Limited partners, business angels or funds.

🎯Goal: Return on investment

💸Object of investment: Small companies and startups

🚪Exits: The exit is forced to generate the return on investment

What is corporate venture capital (CVC)?

Corporate venture capital is a financial investment operation in small startups, in early stages and with a high level risk, a very similar approach as in the previous concept. The main difference is that in corporate venture capital, the investor agent is a large company or corporation, hence its name.

Corporate venture capital is a hot trend in the financial sector, as it allows large corporations to maintain their competitiveness in the market, accessing new ideas and technologies in order not to lose their leadership in an increasingly changing environment. These strategic investments allow large companies to stay up-to-date with innovation and access new ideas and markets through other companies.

🙋Agents: Large corporations

🎯 Goal: Win new territories, markets, technologies or business models.

💸Object of the investment: Small companies, startups or patents.

🚪Exits: The exit is not forced; instead, new collaborations that last over time are sought.

Corporate venture capital vs corporate venturing

Although these two terms are often used interchangeably, there are also differences between these two concepts.

While corporate venture capital seeks to invest in already created companies, corporate venturing can also consist of creating new companies within the corporation itself.

The classic buy or build debate is what marks the difference between these two concepts: while corporate venture capital seeks to invest in already founded companies, corporate venturing seeks to create new startups within the company itself, either internally or with external services such as a venture studio like Corporate Lab.

👉 Find out exactly what a venture builder is and why it is one of the hottest trends of these years 👈

In this case, both are strategic -and not necessarily financial- options. What the corporation seeks with the investment or the creation of new companies is to find new products, services, markets, technologies, methodologies, etc. Any factor that allows them to stay ahead of the market curve, face changes and maintain leadership in an environment that is increasingly competitive and changing.

Do you also think that your company needs to apply corporate venturing? Contact with the Corporate Lab team. We can help you find new opportunities and diversify your business model without interrupting your current roadmap.

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