fUBRASaESJ T^C1^. m^^^ HD28 .M414 -9) ALFRED P. SLOAN SCHOOL OF MANAGEMENT INITIATING SUCCESSFUL CORPORATEVENTURECAPITALINVESTMENTS IANC.YATESand EDWARD B. ROBERTS MITSLOANSCHOOLOFMANAGEMENT June 1991 WP# 3308-91-BPS vooACHUSETTS iiNSiiiuTE OF TECHNOLOGY 50 MEMORIAL DRIVE CAMBRIDGE, MASSACHUSETTS 02139 INITIATING SUCCESSFUL CORPORATEVENTURECAPITALINVESTMENTS IANC. YATESand EDWARD B. ROBERTS MITSLOANSCHOOLOFMANAGEMENT June 1991 WP# 3308-91-BPS MIT 'IBpil MAR3 01932- INITIATINGSUCCESSFULCORPORATEVENTURECAPITALINVESTMENTS* IANC.YATESandEDWARDB.ROBERTS SloanSchoolofManagement MassachusettsInstituteofTechnology ABSTRACT 49largeU.S.corporationsthatmakecorporateventurecapital(CVC)investmentsaspartoftheirnew businessdevelopmentstrategieswerestudied. Venturecapitalfirmswerefoundtobethekeydeal sourceofthemoresuccessfulCVCs. Marketfamiliaritywasfoundtobeevenmoreimportantthan technologicalfamiliarityininitiatingstrategicallysuccessfulinvestmentsinsmallenterprises. Later roundinvestmentsperformedbetterstrategicallythandidearlyroundfinancings. CVCfinancial successflowsfromitsstrategicsuccess,whichinturnisinfluencedfavorablybystrategicfocus. EXECUTIVESUMMARY Thestrategiesof49largeU.S.corporationsusingcorporateventurecapital(CVC)fornew businessdevelopmentwerestudiedandevaluated. Venturecapitalfirmswerefoundtobethekeydeal sourceforCVCsmakinginvestmentsinsmallventuresthattheCVCsjudgetobesuccessful strategically. SuccessfulCVCsfrequentlyfirstinvestinventurecapitalfundsasaventurecapital limitedpartner,thentakeamoreproactivelong-runapproachbyinvestingside-by-sidewithprivate venturecapitalistsdirectlyinstart-ups. Corporatefamiliaritywiththeventure'smarketwasfoundtobemoreimportantindetermining strategicsuccessthanfamiliaritywiththeventure'stechnology. CVCsmustthereforeevaluatethe venture'smarketascarefullyastheventure'stechnologyandseektoaddvaluetoventuresthrough *AddressallrequestsforinformationtoEdwardB.Roberts,DavidSamoffProfessorofManagement ofTechnology,SloanSchoolofManagement,MassachusettsInstituteofTechnology,50Memorial Drive,Cambridge,MA02139. marketing. StrategicallysuccessfulCVCsmakemoreinvestmentsinlaterrounds,fostersupplementary businessrelationshipsbetweentheircorporationandventurefirms,andexerciselesscontrolovertheir portfoliofirms,ascomparedwithlesssuccessfulCVCs. ThefinancialperformanceofCVCprograms wasfoundtocorrelatepositivelywithstrategicsuccess.CVCmanagersalsoreportthatstrategic successresultsfromafocussedstrategy.

Initiating successful corporate venture capital investments PDF

56 Pages

1991

1.9 MB

English

by Yates, Ian C. (Ian Charles)

#americana #blc #mitlibraries

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fUBRASaESJ T^C1^. m^^^ HD28 .M414 -9) ALFRED P. SLOAN SCHOOL OF MANAGEMENT INITIATING SUCCESSFUL CORPORATEVENTURECAPITALINVESTMENTS IANC.YATESand EDWARD B. ROBERTS MITSLOANSCHOOLOFMANAGEMENT June 1991 WP# 3308-91-BPS vooACHUSETTS iiNSiiiuTE OF TECHNOLOGY 50 MEMORIAL DRIVE CAMBRIDGE, MASSACHUSETTS 02139 INITIATING SUCCESSFUL CORPORATEVENTURECAPITALINVESTMENTS IANC. YATESand EDWARD B. ROBERTS MITSLOANSCHOOLOFMANAGEMENT June 1991 WP# 3308-91-BPS MIT 'IBpil MAR3 01932- INITIATINGSUCCESSFULCORPORATEVENTURECAPITALINVESTMENTS* IANC.YATESandEDWARDB.ROBERTS SloanSchoolofManagement MassachusettsInstituteofTechnology ABSTRACT 49largeU.S.corporationsthatmakecorporateventurecapital(CVC)investmentsaspartoftheirnew businessdevelopmentstrategieswerestudied. Venturecapitalfirmswerefoundtobethekeydeal sourceofthemoresuccessfulCVCs. Marketfamiliaritywasfoundtobeevenmoreimportantthan technologicalfamiliarityininitiatingstrategicallysuccessfulinvestmentsinsmallenterprises. Later roundinvestmentsperformedbetterstrategicallythandidearlyroundfinancings. CVCfinancial successflowsfromitsstrategicsuccess,whichinturnisinfluencedfavorablybystrategicfocus. EXECUTIVESUMMARY Thestrategiesof49largeU.S.corporationsusingcorporateventurecapital(CVC)fornew businessdevelopmentwerestudiedandevaluated. Venturecapitalfirmswerefoundtobethekeydeal sourceforCVCsmakinginvestmentsinsmallventuresthattheCVCsjudgetobesuccessful strategically. SuccessfulCVCsfrequentlyfirstinvestinventurecapitalfundsasaventurecapital limitedpartner,thentakeamoreproactivelong-runapproachbyinvestingside-by-sidewithprivate venturecapitalistsdirectlyinstart-ups. Corporatefamiliaritywiththeventure'smarketwasfoundtobemoreimportantindetermining strategicsuccessthanfamiliaritywiththeventure'stechnology. CVCsmustthereforeevaluatethe venture'smarketascarefullyastheventure'stechnologyandseektoaddvaluetoventuresthrough *AddressallrequestsforinformationtoEdwardB.Roberts,DavidSamoffProfessorofManagement ofTechnology,SloanSchoolofManagement,MassachusettsInstituteofTechnology,50Memorial Drive,Cambridge,MA02139. marketing. StrategicallysuccessfulCVCsmakemoreinvestmentsinlaterrounds,fostersupplementary businessrelationshipsbetweentheircorporationandventurefirms,andexerciselesscontrolovertheir portfoliofirms,ascomparedwithlesssuccessfulCVCs. ThefinancialperformanceofCVCprograms wasfoundtocorrelatepositivelywithstrategicsuccess.CVCmanagersalsoreportthatstrategic successresultsfromafocussedstrategy.

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