Corporate Venture Capital’s Role in Disruptive Innovation: Introduction

Trident-ES-1234By Evangelos Simoudis

The pace of technology innovation is accelerating, from software, big data and Internet to biotechnology and materials. This innovation — along with abundant capital and new methodologies like lean startup — is fueling the global entrepreneurship movement. Large corporations are being disrupted or face the threat of disruption. To address these challenges, corporations are starting to realize the need to reinvent their innovation models; they must create agile organizations that will enable them to effectively respond to and take advantage of today’s rapidly changing market and technology environments. They must also look outside their four walls and become part of the ecosystems that generate and fund disruptive innovations.

In addition to their R&D organizations, corporations are realizing that investing in startups can be a significant innovation driver. As a result, more corporations than ever before are forming, reactivating, or expanding their venture groups and committing impressive amounts of capital to these efforts.

This is an extremely interesting time for corporate venture capital. The field of startup investment opportunities is already particularly large, and getting larger and more global. While many of these startups create disruptive technology and business models, to become successful at scale, these startups not only need money — they need access to the distribution networks and client bases of the right corporations. At the same time, institutional venture capital itself is undergoing a fundamental disruption. These two trends provide corporate investors with the opportunity to:

  • Determine under what conditions to start a venture fund
  • Establish organizations that will remain relevant over time
  • Identify the conditions under which they will effectively collaborate with institutional VCs
  • Create a strong presence in the various innovation ecosystems of interest and serve entrepreneurs in the way they now want to be served by their investors — while providing unique value through industry and process knowledge.

To take advantage of the new environment, corporations must utilize more than just their venture groups. They must effectively create and bring together four organizations to form their innovation drivers: R&D, corporate venturing, strategy and corporate development, and business development. We are already seeing successful early examples of this model in companies like Qualcomm and Samsung.

In upcoming blog posts, I’ll explore the impact of institutional VC disruption to corporate venture investors; the state of today’s CVCs compared to those of the past; when corporations should establish venture funds; and a framework for creating venture funds.

Evangelos Simoudis is a seasoned venture investor and senior advisor to global corporations. His investing career started 15 years ago at Apax Partners and continued with Trident Capital. Today Evangelos invests in early and growth stage companies focusing on the enterprise in the areas of data and analytics, SaaS applications, and mobility.

A recognized thought leader on corporate innovation, big data, cloud computing, and digital marketing platforms he is a frequent speaker and contributor in these topics. In 2014 he was named a Power Player in Digital Media, and in 2012 as a top investor in online advertising.

Prior to his investing and advisory career, Evangelos had more than 20 years experience in high-technology industries, in executive roles spanning operations, marketing, sales and engineering. He was the CEO of two startups. Evangelos is a member of Caltech’s Information Science and Technology advisory board, the Science Board of Brandeis University, the Advisory Board of Brandeis International School of Business, and the advisory board of New York’s Center of Urban Science and Planning. Evangelos earned a PhD in computer science from Brandeis University and a BS in electrical engineering from Caltech. Evangelos blogs at corporate-innovation.co/

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