Glossary - Corporate Venture Capital
Corporate Venture Capital (CVC) refers to the investment of corporate funds directly into external startup companies. This type of venture capital investment is often characterized by strategic objectives such as access to innovative technologies, products, or business models, alongside financial returns. CVCs are typically established by large, established firms looking to invest in early-stage companies within or adjacent to their core business areas.
Also known as
- Corporate VC
- CVC
Use cases examples
- Investment Agreement: Pursuant to the terms of this Investment Agreement, [Corporate Name]’s Corporate Venture Capital arm agrees to provide funding to [Startup Name] in exchange for equity.
- Press Release: [Corporate Name] announces a strategic investment through its Corporate Venture Capital unit in [Startup Name], a leading innovator in [Industry sector].
Considerations for investors
- Strategic fit - Investors should evaluate whether the startup offers a strategic fit or advantage to the parent company’s core business.
- Exit strategy - Consider the feasible exit strategies, as corporate venture investments may sometimes prioritize strategic value over quick financial returns.
- Governance and influence - Determine the level of governance and influence the corporate will have in the startup following the investment.
Considerations for founders
- Equity dilution - Founders should be aware that accepting CVC funds will dilute their ownership percentage.
- Strategic alignment - Founders should assess the strategic benefits and potential constraints of partnering with a corporate investor versus traditional venture capital firms.
- Long-term objectives - Consider whether the CVC’s long-term objectives align with the startup’s vision and growth plans.
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