How forward-thinking Corporate Venture Capital firms are using platforms to help their portfolio companies.
Corporate VC firms are becoming more common. They provide startups with in-depth industry knowledge and access to potential customers, while institutional VCs are experts in building companies and driving stronger financial results.Corporate VC firms have more industry connections, and may be able to help a portfolio make direct sales into the industry that they know well. They have deep connections with buyers, that’s why it might make sense for a portfolio company to partner with them. However, a CVC may have less systems and processes for helping portfolio companies - that is where a strong platform can come into play.
More and more CVC firms are turning to platforms to help their portfolio companies succeed. There are lots of reasons for this but we're going to outline a few of the key things that we've seen over the past couple of years.
Strong focus on specialists
First of all corporate Venture Capital are more focused on helping a very narrow spectrum of companies. These are usually companies that are very much in line with what a corporate Venture Capital firm will be interested in, say insurance, banking, fintech, etc, and they usually stick quite closely to these themes. Platforms can be especially useful for corporate Venture Capital because they have a well-defined pool of partners or suppliers that they work with. These partners are usually suppliers, vendors, mentors, or coaches that are very familiar with that industry.
Take for example the insurance industry, there are some very specific vendors and partners that know this industry very well and a platform can be used very successfully to recommend these types of vendors and suppliers. Coaches and mentors can also be recommended using a platform, and these are people who understand the industry very very well.
Deals and discounts
Deals and discounts are significant to start-ups of every stage, but more so to earlier-stage companies, and having lots of these deals can help to extend the runway of early-stage companies. However as companies become more mature they don't need as many deals, instead, they need high-quality recommendations when they are thinking about switching a supplier or moving to a new piece of software and that's where a platform can become very useful. Peers within the group may know about different tools to use and that information can be shared across the CVC community to help make faster buying or business decisions.
Cross-pollination across the network
Another way that a platform can be used is by allowing portfolio companies to promote themselves to outside buyers. This means that a portfolio company can create a profile about itself and share it with an external viewer. Instead of creating a deck and sharing that with a buyer, we allow the portfolio company to create a living URL that talks about their customers, their latest achievements, some recent news, a brochure, and an updated video, and this can then be shared with an outside company via a private or public link. This allows the portfolio company to keep all of its information up to date and the platform managers don't have to keep some kind of deck or PDF about the portfolio company. Text can usually get out of date very quickly and so using this kind of online platform makes it easier for everyone. The head of the platform doesn't have to chase the portfolio company and the portfolio company can use the living profile to promote itself to outside buyers and even other companies that might be interested in its services.
Data Mining
In addition to this, the insights and statistics that are gathered in the platform can be very useful for assessing the needs of the current portfolio or future companies. Because the platform can track all of the interactions inside the network, we know for example what the most popular search requests are, we know who is looking for what and what kind of vendors are the most popular. Here's a list of typical search request lists over the last 6 months in a large CVC firm. What can tell a firm is that there is demand for a specific type of vendor or partner and they may want to think about adding additional vendors to their platform.
Less handholding, more self-service
A typical corporate Venture Capital firm is not going to take a huge stake in their portfolio companies so giving their portfolio companies tools and access to do things in a self-service platform is a great way to go. Platforms allow portfolio companies to find the right partners that they want to work with and connect with them in a fast and easy way. In the past, portfolio companies would have to reach out to one of the partners in the corporate Venture Capital company, ask for a connection and then wait for the two parties to be connected. Lots of Partners in the CVC just don't have the time for this and so giving portfolio companies the tools they need to get the answers they want is important.
Typically, the less ownership that a VC firm has in a company the less likely that company is to interact with the VC. However, if the VC firm gives their portfolio company access to self-service tools that make their lives easier, they are much more likely to use that platform. In addition to this, making it easy to access a platform without the need for logins, and passwords makes it even easier to onboard the portfolio company.
We're seeing more and more engagement by corporate Venture Capital with their portfolio companies and the use of platforms is becoming more and more common. Keep in mind, that giving portfolio companies access to a platform does not guarantee success. Portfolio companies have to be reminded that platforms exist for their well-being and that they should be used regularly to ensure that companies are connecting, they understand the landscape of suppliers, vendors, and partners and they know that these platforms exist.
