Corporate Venture Funds, Startup Studios, and Accelerators. Why the Buzz?

  • Current problems. What issues there are, and why has such a demand formed in the market. What is wrong with accelerators, corporate venture funds, etc.
  • Historical background. How it all settled in the world and where it’s coming from. We’ll try and paint an accurate picture.
  • Corporate venture builders in Eastern Europe. The exact lessons and gotchas we had. Pros and cons of a corporate venture builder and who might find it fitting.

What happened? Why does it suddenly matter?

Indeed, we all were sailing smoothly. Everyone was minding their own business, profits grew little changed. And then, suddenly, some hipsters came out of the woodwork. Innovation, technology, startups, custdev, products, and digital is all over the news. Honestly, it looks like the push finally came to shove.

  • Energy carriers are depreciating.
  • The bank rates are steadily below zero.
  • The most valuable companies are tech, and the trend is only growing.
  • Your competitors used to just post falafel photos on Instagram, but now they are quickly growing into global platforms and start eating you.
  • The market size where they could sell their product is incomparable.
  • We’ve got big problems with working towards exits (sales, M&As, IPOs, etc.)
  • The investment opportunities and round volumes are different with startups.
  • Instead of EBITDA, venture building uses the cult and culture of growth.

Who is to blame?

If you asked me to explain the reasons behind the mismatch, I would end up with 3 more articles, so the rough generalization sounds like this: blame it on the conflict of interest and misunderstanding.

What do corporate ventures and corporate startup studios have in common?

From a corporate point of view, this is a category of investments with a high risk of not working out but an equally high chance of a big reward.

  • Creating within a corporation. To cut the story short, it won’t work. A small startup can’t survive within a corporation, and there’s a huge cemetery of those who tried and failed.
  • Corporate accelerators. It’s the most common format, and we’ll talk about it further in more detail.
  • Corporate venture fund. It’s a flexible and customizable format, but it often suffers from incorrect expectations of all stakeholders.
  • Corporate startup studios or venture builders. I would call it the next step in evolution after the venture fund. In the next paragraph, I will describe the differences.

What is the difference between corporate accelerators and venture builders?

A successful corporate accelerator is mostly an exception from the rule. Tons of articles have been written about this, so to avoid being repetitive, I’ll only mention two key thoughts.

  • If you as an accelerator own 5%, it hardly concerns you.
  • If you as a fund own 20%, it’s better, sure, but you’ll only watch the founder steer the wheel. Spray and pray, as they say. After an investment, all you are left with is hope.
  • If you as a startup studio own 80%, then it’s definitely your work and your problem.

Fund, builder, accelerator. How to choose your format?

Let’s suppose you have an infrastructure to grow new businesses, and instead of working with a single startup, it’s tailored to keep a whole portfolio. Then you might want to consider your own venture builder, startup studio, or M&A department to purchase projects as a whole.

Summing up. What is to be done?

When it comes to new things and the future, no one can predict the unknown. You can only make assumptions (hypotheses) and check whether you were right, whether it produces the effect you expected. Companies that test more hypotheses per unit of time are the coolest and strongest.

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Max Volokhov

Max Volokhov

Head of R&D and Innovation @admitad.com & founder of the startup studio