MIT Sloan Management Review Article on Steer Clear of Corporate Venture Capital Pitfalls

Big companies and risk capital can be awkward partners. Here’s how to get corporate venturing right.

No one needs to be told how crucial innovation is to a business’s survival in a constantly morphing landscape. Corporate venture capital (CVC) is one of three main innovation mechanisms that large companies now deploy, along with internal R&D and innovation M&As. In recent years, CVC units have become increasingly important across geographical borders, industries, and technology sectors, helping companies to stay nimble and forward-looking — and to create new growth engines. In 2022, global CVCs invested almost $100 billion in about 5,000 investment rounds of VC-backed companies.1 Over 100 new CVCs were created that year alone.

But even though CVCs kick off with great fanfare and optimism, many, if not most, fail to achieve their objectives. Often, they don’t survive the first change in CEO or make it to their 10th birthday. Over the past several years, many companies have closed, slowed down, or redesigned their initiatives. A third of all active CVCs were mothballed or shut down in the past three years. One prominent venture capitalist, Fred Wilson, has said that for corporations, investing in companies rather than acquiring them outright makes no sense.

About the Author

Ilya A. Strebulaev (@ilyastrebulaev) is the David S. Lobel Professor of Private Equity and a professor of finance at the Stanford Graduate School of Business and a research associate at the National Bureau of Economic Research. He is the founder and director of the Stanford Venture Capital Initiative and a coauthor of The Venture Mindset: How to Make Smarter Bets and Achieve Extraordinary Growth, to be published by Penguin Random House in May 2024. Amanda Wang is a second-year law student at Columbia Law School.

Learn more about MIT SMR.