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Initiating Successful Corporate Venture Capital Investments (Classic Reprint)

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Sloan School of Management Massachusetts Institute ofT echnology ABSTRACT 49 large U.S. corporations that make corporate venture capital (CVC) investments as part of their new business development strategies were studied. Venture capital firms were found to be the key deal source of the more successful CVC s. Market familiarity was found to be even more important than technological familiarity in initiating strategically successful investments in small enterprises. Later round investments performed better strategically than did early round financings. CVC financial success flows from its strategic success, which in turn is influenced favorably by strategic focus. EXECUTIVE SUMMARY The strategies of 49 large U.S. corporations using corporate venture capital (CVC) for new business development were studied and evaluated. Venture capital firms were found to be the key deal source for CVC smaking investments in small ventures that the CVC sjudge to be successful strategically. Successful CVC sfrequently first invest in venture capital funds as a venture capital limited partner, then take a more proactive long-run approach by investing side-by-side with private venture capitalists directly in start-ups. Corporate familiarity with the ventures market was found to be more important in determining strategic success than familiarity with the ventures technology. CVC smust therefore evaluate the ventures market as carefully as the ventures technology and seek to add value to ventures through Address all requests for information toE dward B. Roberts, David Samoff Professor of Management ofT echnology, Sloan School of Management, Massachusetts Institute ofT echnology, 50 Memorial Drive, Cambridge, MA 02139.
(Typographical errors above are due to OCR software and don't occur in the book.)

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