Guide to Corporate Venture Capital

By PRADEEP TAGARE

Corporate venture capital is the least understood category of venture capital. Most venture capitalists fear — if not despise — corporate venture capital, while entrepreneurs are often confused about whether they should take this capital or not.

The concept of corporate venture capital is simple. A company takes a minority stake in a start-up or growth-stage company, typically, to achieve its own short-term or long-term strategic goals. The investee company, in theory, gets access to all the resources of the investing company.

The concept has been around in the U.S. and other developed countries for a long time. Quite a few of the Fortune 100 companies – Intel, Cisco, Unilever, BP – have a separate venture capital entity for such investments. In India, corporate venture capital is a relatively recent phenomenon. Local companies such as Reliance, Airtel and Future Group have started their own investment entities.

Of late, mid-size companies have launched their own units such as Quest Software in the U.S. and an Intel Capital portfolio company, One97 Communications, which has started investing in mobile value-added services companies in Asia.

Of course, for an entrepreneur it’s not that simple, and dealing with a venture capital firm can be overwhelming. Here’s a cheat sheet based on my experience at Intel Capital, a corporate venture capital group of Intel:

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