Raising funding from corporations? It's like getting married.

The pro is financial stability; the con is compromising on the decor in every room.

The Dynamics of Corporate VC

Why Read:

• Read this article to understand the opportunities and challenges of corporate venture capital, helping you to make informed decisions about funding and partnerships.

Featuring:

• Alejandro Cremades (@acremades), Co-Founder at Panthera Advisors

• Link: 

  “Dynamics Of Corporate Venture Capital For Early-Stage Startup Funding And Growth”

Key Concepts and Tactics:

• Understanding the Growth of Corporate Venture Capital:

  • Point: Recognize the increasing trend of large corporations investing in early-stage startups.

  • "Corporate venture capital for early-stage startup funding and growth has been ramping up in the last decade or so. Large corporations and multinational companies are diverting money and resources to external ventures and startups."

  • "In 2021, transactions worth $130.9B were executed worldwide, which is more than twice the amount traditional VCs invested. In the US alone, CVC investment was over $71B."

• Identifying the Objectives of Corporate Venture Funds:

  • Point: Align your startup's goals with the strategic objectives of potential corporate investors.

  • "Corporations may seek to invest in startups for strategic purposes such as raising their own sales and capturing new markets. If the new startup will purchase inventory and parts from the corporate investor, it's a viable deal."

  • "Instead, these corporations invest in upcoming startups with innovative concepts. Offering capital to startups with tech innovations allows corporate investors to stay ahead of the curve."

• Meeting the Criteria for Corporate Venture Capital:

  • Point: Ensure your startup meets the specific requirements that corporate investors look for.

  • "Startups that can demonstrate a product-market fit, have an established customer base, have sales and revenues, and have actual traction can attract CVC. This investment is best suited for ventures that show potential for rapid growth."

  • "Corporate investors are open to accepting an equity stake ranging from 10% to 30%. Instead of large stakes and ownership, they are more about building relationships and providing support."

• Leveraging the Advantages of Corporate Venture Capital:

  • Point: Capitalize on the unique benefits that corporate investors can provide beyond just funding.

  • "Partnering with an established brand with corporate venture capital gives your company instant recognition and market presence. The investor brand is also committed to your success and will likely advertise the partnership."

  • "Larger corporations have an established infrastructure and extensive network of customers, investors, and other stakeholders that you can use. Founders also get guidance with aspects like marketing, distribution, customer support, operational strategies, R&D, and HR resources."

• Navigating the Potential Downsides of Corporate Venture Capital:

  • Point: Be aware of and prepare for the potential risks associated with corporate venture capital.

  • "As a rule, CVC investors tend to maintain a backseat and let the startup operate independently. However, they may request board seats and try to influence product designs and other strategic decisions."

  • "If you're developing IP and IA, you could risk losing business secrets to the corporate investor. A conflict of interest can arise when a larger corporation develops products using your IP and competes with your company."

• Securing Your Interests in CVC Deals:

  • Point: Take proactive steps to protect your startup's autonomy and intellectual property when negotiating with corporate investors.

  • "Secure your autonomy and independent decision-making by setting ground rules about governance rights early on during the negotiations."

  • "Secure your IP with robust terms and conditions and carefully demarcate data and information exchange."

Avoid 'Fear of Failure' Culture

Why Read: 

• Read this article to understand how to implement a growth mindset culture, bridge the perception-reality gap, and establish effective experimentation processes.

Featuring:

• Elena Verna (@ElenaVerna) VP, Growth & Data at Dropbox

Link:

• “Improve Growth Mindset in your company with a weekly Experiment Review meeting.”

Key Concepts and Tactics:

1. The points will be actionable and tactical, following the format you've specified.

   • Understanding the Perception-Reality Gap:

     • Point: Recognize that the perception-reality gap is a fundamental risk for companies, especially as they scale.

     • "Without the right mindset, your company will not have predictable, sustainable, defensible growth. This mentality—the Growth Mindset—solves one of the most fundamental risks for companies..."

     • "Tell me if this sounds familiar: Your company is doing a lot of work and releasing a lot of initiatives, but none of it is materializing into impact on the numbers you want to see as an outcome. No customer adoption and/or no business metrics moving. When this happens, there's a foundational root cause: the perception-reality gap."

   • Identifying the Causes of the Perception-Reality Gap:

     • Point: Address the root causes of the perception-reality gap in your decision-making process.

     • "The perception-reality gap generally develops because of 2 things:

       • 1) Decisions are intuition-driven, instead of data-driven: Choices are made based on a loose connection to historical patterns that you sense, and data is not being used in the process—or even collected, in the first place.

       • 2) Decisions are dictated by the highest-paid person in the room: Even though they're operating from pure opinion, the most senior person's input is taken as an unquestioned direction."

   • Embracing the Scientific Method:

     • Point: Implement the scientific method in your approach to problem-solving and decision-making.

     • "Enter… one of my all-time favorite human inventions: The Scientific Method! Make an observation, state the problem, come up with the fix to the problem, try to apply the fix to the problem, observe the output of that. That helps you augment your data, so you can either adjust the problem or adjust the solution."

   • Shifting the Mindset Towards Learning from Failures:

     • Point: Create a culture that views failures as learning opportunities rather than something to avoid.

     • "This is where the growth mindset starts to come in: Instead of running away, this mindset is so much more about actually looking at the stain. Whipping out the magnifying glass, getting close to it, smelling it, touching it, figuring out how the stain happened. Then, telling everybody, 'Hey, I made the stain! I didn't know I was going to make the stain, but I did. And here's how it happened. And this is what I learned from it, to make sure that the stain does not happen again.'"

   • Setting Up an Experimentation Program:

     • Point: Establish an experimentation program that focuses on learning velocity rather than just producing wins.

     • "The goal of experimentation is actually not to produce wins. No, the goal of experimentation is the velocity of learning. And the velocity of learning is all about understanding where our hypotheses were incorrect to expose (and then consistently bridge) the perception-reality gap and scale intuition!"

   • Implementing Async Rituals:

     • Point: Set up specific Slack channels to facilitate ongoing communication about experiments and results.

     • "The async component is based on 3 distinct channels:

       • (1) General Experiment Channel

       • (2) Experimentation Results Channel

       • (3) #oh-shit Channel..."

   • Conducting Regular Experimentation Review Meetings:

     • Point: Hold weekly experimentation review meetings to discuss results and learnings.

     • "Every week for one hour, we have an experimentation review. This meeting is mostly focused on reviewing results, but we generally highlight the insights that are most relevant for everyone to hear."

     • "The goal is to align on evaluating tests correctly, spur conversations on additional analysis, get feedback on other variations to test, and make big business decisions."

   • Fostering a Culture of Open Communication:

     • Point: Encourage open sharing of failures and learnings across the organization.

     • "The #oh-shit channel is crucial. Every company should have one! It should be an open channel where everyone, including leadership, celebrates learnings from failures."

   • Avoid 'Fear of Failure' Culture

     • Point: Secure visible support from leadership to maintain the growth mindset culture.

     • "Leadership must be visibly supportive. Otherwise, teams will quickly return to the 'fear of failure' culture, which is the terminal state for Growth mindset."

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