Knowing how to effectively evaluate deals is essential to corporate venturing activity.
By Tom Allen, M&A Expertise and Content Lead for Midaxo, an M&A Leadership Council partner organization
The impetus for corporate venturing is obvious: a corporation’s investment in startup companies can create new means to drive growth, financial return and advance strategic priorities.
Generating valuable growth for shareholders, whether in the present or future, requires that companies clearly understand their strategy and operational capabilities. Clarity in these areas, and a demonstrated commitment to them, improve the likelihood of both financial promise and participation in startup investments that will provide innovation and new market knowledge. This helps corporates bring fresh models and solutions into their existing businesses. In addition, corporate venturing can provide an affordable and rapid means to test or participate in disruptive activity, tackle riskier ideas or access top talent without over-committing internal resources or derailing existing initiatives.
While pioneering new services, models and markets is attractive, it is also time and resource intensive. The rapid pace of change and emergence of innovative technologies all over the globe are stretching corporate venturing teams’ sourcing and due diligence capabilities. While the scope of efforts differs, corporate venturing is an increasingly substantial effort; Google Ventures for example, has participated in 300 investments with over $2.4 billion under management.
Delivering meaningful success, regardless of size, means the evaluation of hundreds of targets per year. Knowing how to effectively evaluate deals is essential to corporate venturing activity that will deliver in a timely, profitable and additive way to the business. Read more.