A lot of people associate innovation with start-ups — many cool, new ideas and concepts have indeed originated in start-ups and young firms. So, one might be wondering how corporations can keep up with start-ups when it comes to innovation? One answer to this question can be found in corporate venture capital CVC. CVC investments are minority stake equity investments by large, established corporations into young, small, entrepreneurial ventures, called portfolio firms.
These investments are done by designated CVC units, which often operate with a substantial amount of autonomy. PepsiCo has two initiatives designed to tap into new companies and PepsiCo10 is an incubator program, started in , that invests in 10 promising startups each year.
Microsoft Ventures, now called M12, invested in more than 50 startups up to last year, with a particular focus on artificial intelligence. One high profile businessman, Richard Branson, who built the Virgin brand, has long been a champion of startups and is an investor in Mosaic Ventures, a new Silicon Valley-style fund that is willing to take a chance on aspirational tech founders. He has laid out his reasons for supporting startups. He believes that startups are the job creators and innovators of the future and transform the way we do business.
These businesses not only have the potential to become a vital source of employment, innovation and productivity to economies, they are a shining example to younger generations that creativity, passion and hard work can change the world for the better. This points to one of the major reasons large businesses are interested in smaller ones, it is these startups which so often pioneer the technologies of tomorrow — Microsoft was once a startup - and the big corporates want a piece of that action.
They bring a drive, focus and enthusiasm that big corporations cannot replicate, even in the most lavishly funded laboratories. This is not limited to AI. Around the world, thousands of startups are engaged in exploring new possibilities in transport, healthcare, finance, education and other sectors. Typically, the investment branches or venture capital funds of the big corporations will seek out startups whose activities complement their own commercial specialism.
This strategy ensures a corporation can maintain a focus on its brand while extending the functionality of its services and guarding against being left behind. Take the once huge company Eastman Kodak. But then something bad happened. On January 19th in Rochester, New York, the company filed for Chapter 11 bankruptcy, after years in business.
Meanwhile, on the other side of the US, on the West Coast in San Francisco, at another company called Instagram, the champagne corks were popping.
Working with your accountant, tax advisor or a financial advisor, you can create a proactive investing strategy to increase your business income. You might even set up a business investment account. Businesses also use securities to look for new money-making opportunities. For example, during the first year of the COVID pandemic, many small businesses saw their sales plummet, while the stock market soared. Businesses that invested their excess cash were able to offset some or all of their operating losses with investments in securities.
Investing also allows companies to take advantage of attractive market opportunities to increase their balance sheet. The challenge at that point was to grow the business following the blueprint that Bardin and his team had already proven.
This is exactly where big companies should excel. It is far easier to take an existing, proven product, and pump it through established distribution channels, than to develop something new. Imagine instead if Google had acquired Waze when it had only 10, users, and if Bardin had left after the typical two years. Google probably would not have been ready or capable to take over the business. As Walk put it:. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment.
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