Corporate Venture Versus Venture Capital
Venture capital tries to gain profit by investing in young and promising firms. They don’t involve in any other profitable activities rather than investing in funds.
Corporate ventures are companies that make beneficial profits by selling other products or services. They invest in firms that can provide strategic benefits to the parent company. They in all own whole company whereas on the additional hand. Venture capital doesn’t own the entire parts and involve themselves much in the company’s activities. You can take Google handling YouTube as an example of the corporate venture.
DIFFERENCES BETWEEN CORPORATE VENTURE AND VENTURE CAPITAL :
The corporate venture consider strategic objectives; they only indulge themselves with a company who can gain better outcomes and a healthy relationship with the company.
The venture capital firms, on other hands, majorly focus on financial returns. The success rate here is not always at the brighter side, but the theme is to run a business predicted above average.
Corporate ventures invest in initial to mid-stage of the firm, as this seems to be the best time for deal flow among large customer base. Also, market sourcing is essential for the firm. Hence, this turns out to be a mutually profitable deal for both.
Venture capital is well known to provide funds to startup companies. It is all about the initial stage of a company. They have great foundation teams for achieving financial stability and success.
Investment Follow up
When it comes to corporate ventures, their investment depends on the company’s financial condition and security terms. In case the situations change, the funding objective may also change. Hence, there is a risk involved in taking capital from corporate ventures.
On another hand, the venture capital provides committed investments. You can consider it as a three-year plan. They provide initial investments in the first three years and then complete other commitments in the upcoming years until the company becomes well established.
The corporate ventures don’t hold on for a tight control because of accounting implications. They prefer a board observer role rather than a seated position. In this way, they involve themselves less and still have an essential role in the effective functioning of the company.
On the other hand, venture capital seeks proper control over everything and try to analyze everything in a better way so that it can help the firm as much as it can to achieve and grab more profits. This is important to have contact with a company’s startup leadership team.
When corporate ventures invest, they accept considerable benefits from the firm for their funds. They aim for higher profits. Though financial returns serve a great purpose but still they look for other factors too. They see value in the investment, analyze whether they could share the company’s product sales, and hence, you can say that they consider both financial and promotional benefits while investment.
On the other hand, venture capital least expects anything other than financial returns from the firms it lends the funds to. That’s the only moto for venture capital investments or fundraising.