CB Insights’ Growth Collective demystifies the growth strategies of the world’s largest organizations. We surveyed 365 corporate venture capital arms to understand how CVCs govern, set objectives, compose their teams, embed processes, and use technology. This research is the most comprehensive look at how CVCs operate and drive growth in their organizations. Growth Collective members also have access to best practices and tools to better deliver on their corporate venture capital goals.

1. 1
The State of CVC
A Six-Part Series Demystifying
Corporate Venture Capital

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Introduction
CB Insights’ Growth Collective demystifies the growth strategies of
the world’s largest organizations. We surveyed 365 corporate venture
capital arms to understand how CVCs govern, set objectives, compose
their teams, embed processes, and use technology. This research is
the most comprehensive look at how CVCs operate and drive growth
in their organizations. Growth Collective members also have access to
best practices and tools to better deliver on their corporate venture
capital goals.

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Governance: Is there a downside to reporting to the CEO?
Objectives: Measuring value, financial vs. strategic returns
Deal-making: It’s about who you know
Team Composition: Emphasis on “corporate”
Process: Oversight and independence, a balancing act
Tools and Technology: CVC in the age of digital
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Table of Contents

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The State of CVC, Part 1: Is there a
downside to reporting to the CEO?
In the first part of our series, we look at organizational
structure, perception, and performance.

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In the first part of our series, we look at organizational structure, perception,
and performance. Our analysis shows that while most CVCs report directly
to the CEO, this reporting line and its influence may not necessarily
drive performance.
CVCs typically report into the highest ranks of the organization and align with central
functions as opposed to business units. While almost a third of CVCs surveyed report
directly into the CEO, another 27% report into an Investment Committee, which more
often than not includes the CEO. Access to top executives in the organization ensures
the resources, credibility, and support crucial for deal-making.
N= 254
CEO
31%
Invest
Comm
27%
Corp
Strat
11%
Corp
Dev
7%
CFO
7%
BU
3%
CTO
8%
CEOs sit on 60%
of committees

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Understandably, CVCs reporting into the CEO perceive a higher degree of effectiveness
compared to their non-CEO reporting peers. This is due to a streamlined oversight process
that allows CVCs to get deals done — a competitive advantage in a business that rewards
speed and decisiveness.
CEO IS THE HOT TICKET
REPORT TO CEO = BETTER OVERSIGHT
Satisfaction with current reporting line is highest among those reporting into the CEO,
while CVCs reporting into the CTO, CFO, or Corporate Development group often seek a
new reporting structure. Those looking for a change are most likely to cite the CEO as
their preferred report line.
Satisfaction with reporting structure
Current Reporting Line N= 254
N= 253
10%
The percentage
of unsatisfied CVCs
not reporting to the
CEO interested in
switching their
reporting line to
the CEO
Oversight effectiveness
45% to 31%
Portion of CEO
vs. non-CEO
reports selecting
"very effective"

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BUT HERE’S THE CATCH
DON’T FORGET THE BUSINESS UNITS
While most CVCs clamor to report to the CEO and build relationships at the center of
power, the ability to win deals is often based on the value proposition provided by the
business units. When asked for the two main reasons startups choose to work with a
CVC, respondents overwhelmingly cite reasons such as domain expertise, business
unit relationships, and defined partnership paths with the business.
While CVCs reporting to the CEO perceive greater effectiveness, this does not result
in a high win rate (i.e., investment in the round for which you provide a term sheet).
CVCs reporting into the CEO are more likely to lose at least half the deals they enter.
Win rate greater than 50%
Reasons startups work with a CVC
N= 219
N= 225
Access to
resources/
expertise
Intros
to BUs
Defined
partnerships
Market
entry
Distribution
channels
Capital Clean
terms
Potential for
acquisition

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THE BOTTOM LINE
Reporting directly to the CEO is viewed by most CVCs as necessary and the most
effective option to get deals approved. But when we look at win rates, this isn’t
necessarily the case. The question that arises is how those at the top enable
effective collaboration with the business units to deliver the value startups expect.

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The State of CVC, Part 2: Measuring
value, financial vs. strategic returns
In the second part of our series, we look at CVCs’ objectives.

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Annual global CVC financing trends (2000-2018)
In the second part of our series, we look at CVCs’ objectives. Our analysis
shows that while most CVCs serve a dual purpose — strategic and financial
— the difficulty of effectively articulating strategic value means that financial
viability becomes increasingly important.
A look into past trends shows that the number of CVCs as well as their deal activity
largely follows the business cycle, growing in good times and shrinking in bad times.
The median lifespan of a CVC over the past 5 decades rarely extended beyond 5 years,
and during financial downturns, investment by CVCs can drop by as much as 84% —
as occurred during the boom and bust of the technology sector in the early 2000s.

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CHASING STRATEGIC AND FINANCIAL RETURNS
In 2018, CVC deal volume and investment reached new heights. Many of the CVCs
contributing to this activity are young, having been created within the past 5 years.
N= 255
CVC maturity
More than three-quarters of CVCs have a dual mandate to deliver both strategic value
and financial returns. CVCs focused on a single goal are more likely to focus on
strategic value than financial returns.
N= 255
Both strategic
and financial
Financial only
Strategic only
CVC objectives

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BITING OFF MORE THAN THEY CAN CHEW
In their pursuit to deliver strategic value, CVCs tend to focus on bringing new products to
market, accessing innovation, and integrating new startups into the organization. Major
questions here include: what outcomes will result from engaging startups, and who
should drive these engagements?
N= 235
Strategic goals of CVCs
3
Average number of
strategic goals:
CVCs are typically tasked with focusing on 3
strategic objectives. This is in addition to their
mandate to yield financial returns.

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“IS THIS ABOUT RIGHT?”
Strategic impact is significantly more
difficult to measure than financial impact.
The reasons for this are two-fold:
1. It’s difficult to determine what should be
measured — partnerships, acquisitions,
learnings, etc.
2. Most measures of impact will be lagging
indicators, with benefits that won’t
become obvious until years after an
investment is made.
These two factors make it difficult for CVCs
to track the value they deliver to the business.
Measuring financial performance is often straightforward and relatively easy. Internal
rate of return (IRR) is the most commonly used financial measure, while TVPI is used
by 15% of CVCs.
N= 225
How do you measure financial
returns?
N= 241
Success helping portfolio companies
build relationships
with the business
With the difficulty of measurement
withstanding, building relationships
between portfolio companies and business
units is considered a key strategic success
factor for many CVCs. When measuring
their effectiveness at this, CVCs indicate
there is room for improvement. Less than
a fifth of respondents identify as highly
successful in this area.

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THE BOTTOM LINE
The value proposition of CVCs extends well beyond financial returns as corporations
look to these programs more and more to help solve business challenges, especially
challenges related to innovation. Without the ability to measure and in some cases
deliver strategic value, the question becomes whether these groups will have staying
power during the next financial downturn.

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The State of CVC, Part 3:
It’s about who you know
In the third part of our series, we look at the
deal-making process.

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2018 Deal
Volume:
2,859
2018 Average
Deals:
5
(per CVC)
2018 Deal
Stage:
58%
Seed / Series A
In the third part of our series, we look at the deal-making process.
Our analysis finds that CVCs are consistent in how they structure and
find deals, but this approach may serve some better than others.
A look back at the deals from 2018 finds that CVCs were busy last year, making 2,858
investments globally — a 34% YoY increase from 2017. The top 10 CVCs in terms of
deal activity each made more than 30 investments within the year. In total, these deals
accounted for nearly a fifth of all deal activity.
Looking at these numbers, how do you stack up?

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So how do you find the right companies to invest in? The majority of CVCs rely on personal
networks and their relationships with traditional venture capital funds and business
partners to identify startups. CVCs are also more likely to source deals from inbound
pitches than from active outbound prospecting.
FRIENDS OF FRIENDS
Source of dealflow
N= 225
When asked for their greatest challenge, CVCs frequently cited discovery and tracking
of startups. This obstacle falls second only to the buy-in and engagement of
corporate stakeholders.
Greatest challenges
N= 196
From
VCs

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RULES OF ENGAGEMENT
CVCs are generally split on whether they prefer to lead deals or not — a preference
influenced by their maturity and experience.
N= 233
Aside from preference for leading deals, CVCs are largely consistent in their approach to
deal-making. Unhampered by a specific exit date, CVCs tend to have greater flexibility
than their traditional VC counterparts.
Preference for leading deals by CVC maturity
Most CVCs do not have a defined minimum equity stake. For the minority that do,
less than half have a minimum greater than 10%.
Minimum equity stakes
N= 236

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Right of first refusal Board positions
Right of first refusal is the preference
among CVCs, but nearly three-quarters
of them will not let this condition prevent
a promising deal.
With 7 in 8 CVCs taking board seats,
there is a clear interest in having a
stewardship role.
N= 234 N= 234

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THE BOTTOM LINE
With just 30 CVCs accounting for more than a third of the total deal volume in
2018, activity in corporate venture is primarily driven by a handful of organizations.
While operating under similar deal-making principles, CVCs are unequal in their
access to dealflow. To date, for better or worse, the primary source of dealflow
is personal networks.

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The State of CVC, Part 4: Emphasis
on “corporate”
In the fourth part of our series, we look at team composition
and compensation.

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Number of full-time staff by size of capital pool*
N= 240
*Nearly half of
CVCs have
$50M or less in
committed
capital
In the fourth part of our series, we look at team composition and
compensation. Our analysis finds that CVCs differ significantly from
traditional venture capital firms in terms of the backgrounds and
compensation of their team members.
CVCs are small, with more than three-quarters employing 10 or fewer full-time staff
members and more than half employing 5 or fewer. Headcount and capital are also
correlated: CVCs with $50 to $150M in capital are three times more likely to employ 6 or
more full-time staff than CVCs with less than $50M.

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Most of CVCs’ investment professionals are based in the corporate center as opposed
to in a technology center (e.g. Silicon Valley, Tel Aviv, etc.) or business unit. One in five
CVCs operate in more than one of these settings.
On average, approximately 3 in 5 CVC staff members are investment professionals,
typically with backgrounds in finance, corporate development, and consulting. These
investment professionals frequently come from outside the parent organization: more
than half of CVCs hire 75% or more of their investment professionals externally.
A DIVERSE BACKGROUND
Primary background of investment team
N= 237
Location of investment professionals
N= 235

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$$$$$
N= 234
CVCs differ in their approach to compensation. The majority compensate investment
professionals the same way other company employees are compensated, while
two-fifths either provide a carry based on fund returns or a custom incentive structure.
THE BOTTOM LINE
Compensation model
CVCs are consistently small but tend to vary in how they compensate their staff and,
to some extent, who they hire. The background of CVC investment professionals, their
position within the corporate headquarters, and their financial incentive structure
distance them from more traditional venture capital operations.

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The State of CVC, Part 5: Oversight
and independence, a balancing act
In the fifth part of our series, we look at CVC processes
and workflow.

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84% of CVCs
have an
investment
committee
Oversight effectiveness
N= 253
In the fifth part of our series, we look at CVC processes and workflow.
Our analysis finds that organizations attempt to balance CVC oversight
with independence and that CVCs acknowledge the importance of
business unit engagement.
Only about a third of CVCs find their oversight processes very effective and supportive
of deal-making. An investment committee (which nearly all CVCs have) often plays a
chief role in oversight and the deal-making process.

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OVERSIGHT AND INDEPENDENCE: A FINE LINE
The vast majority of CVCs require sign-off on deals, and the most common approver is
the investment committee, which more often than not includes the CEO and the CFO.
Nearly half of organizations require deal approval from more than one internal stakeholder.
N= 253
Signs off on deals
N= 255
Budget from which CVCs are funded
47% of organizations require
sign-off from more than 1
stakeholder
Nearly two-thirds of CVCs are funded from a standalone budget, which frees them from
the influence of business units and central functions (e.g. R&D, IT, etc.).

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VALUE THROUGH PARTNERSHIP
CVCs keep their organizations well apprised of their dealflow: nearly 9 in 10 CVCs report
on their funnel at least once per quarter to either leadership or business units, and almost
half of CVCs report monthly or more frequently.
Frequency of reporting
N= 234
N= 229
Approaches to BU engagement
To engage business units — a challenging task — CVCs employ a range of techniques.
Coordinating meetings between business units and startups is most common, but many
also provide reports on innovation based on their market research and startup due
diligence. In general, however, CVCs have not found a scalable or repeatable way to
share the insights learned from their operations.

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THE BOTTOM LINE
Organizations walk a fine line between oversight and independence: almost all
organizations require sign-off on investment deals, but budgets are largely independent
of business units and other central functions. With or without heavy oversight, CVCs
generally appreciate the importance of keeping stakeholders, specifically business
units, informed. By communicating on a regular cadence and bringing important
startup information to BU leadership, whether through meetings or demo days,
CVCs help to build support and deliver strategic value.

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The State of CVC, Part 6: CVC in the
age of digital
In the sixth part of our series, we look at the technology and
tools CVCs use to do their work.

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Primary dealflow tracking solution
N= 226
In the sixth part of our series, we look at the technology and tools CVCs
use to do their work. Our analysis finds that CVCs typically rely on manual
solutions to manage their workflow, which frequently results in
inefficiencies and information silos.
A crucial element of a CVC’s job — tracking deal flow — is most commonly conducted
using spreadsheets or a CRM solution. Both approaches have their drawbacks, namely
the need for frequent updates. A surprising 12% of CVCs rely predominantly on email to
manage their dealflow.

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TECHNOLOGY DISABLED
When conducting diligence, CVCs are split as to whether they use deal room software
or not. Of those that do, most employ an off-the-shelf cloud storage solution such as
Dropbox or Google Drive. Far fewer CVCs use software to manage/track cap tables
(i.e., equity management solutions).
Two-thirds of CVCs do not have a central place where others in the corporation can
access information on startup conversations and activity. With their activities siloed,
it’s not surprising that the same percentage of CVCs admit that multiple teams within
their organization have unknowingly engaged the same startup for different purposes.
Does your CVC have a central
repository of startup interactions?
N= 226
Yes No
34%
66%
Has your organization engaged
the same startup unknowingly?
Yes No
77% 23%
N= 224
Does your CVC use software to
manage cap tables?
Yes No
67%
33%
Does your CVC use a deal room
software solution?
Yes No
49%
N= 225N= 224
51%

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Room for improvement
CVCs generally report that their dealflow management capabilities are satisfactory,
though more are dissatisfied than extremely satisfied. Dissatisfaction was highest
among spreadsheet users and lowest among users of a VC-specific CRM solution.
Areas for improvement likely center on breaking down data silos and gaining access
to timely information.
Satisfaction with dealflow management
N= 227
40% of spreadsheet
users are dissatisfied
Note: “Other” responses frequently cited Microsoft Onedrive and Sharepoint.
Dealroom software
N= 115

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THE BOTTOM LINE
Whether a reflection of their small size and youth or their unique workflow, most CVCs
rely on technical solutions — like spreadsheets, CRM, and cloud storage — that are not
built for their specific needs. Satisfaction is generally higher for customized solutions
built for the high-speed, high-touch nature of CVC. Ultimately, the best solution will be
one that increases transparency and breaks down information silos preventing efficient
and effective interactions with startups.

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If you have any questions regarding the research or are interested in
speaking with us about your experiences with corporate venture capital,
please reach out to Matt Hopkins at matthew.hopkins@cbinsights.com.
Interested in driving growth through corporate investing and partnerships?
CB Insights’ Growth Collective is an exclusive network that offers access to
peers, tools, and insights to overcome corporate growth challenges. Please
reach out to Sara Lindholm at slindholm@cbinsights.com to learn more.