Corporate Venturing: How Much to Wait Before Killing an Opportunity? (Breaking Up with a Start-up)

By Mª Julia Prats, Josemaria Siota, Isabel Martinez-Monche, Yair Martinez, and Celeste Saccomano

Corporate venturing – the collaborative framework between established corporations and innovative start-ups – continues emerging at speed (a recent 42% increase in some cases). Prestigious companies such as AT&T, Schneider Electric, Intel, Siemens, Qualcomm, Xerox, GE, IBM, Lucent, Cisco, Samsung, Comcast, Henkel, Wells Fargo and Merck are collaborating through many mechanisms such as venture clients, venture builders, scouting missions, challenges prizes, corporate accelerators, and more.

Firms’ chief innovation officers look for data to feed their decisions with evidences in this field. How much time is required to integrate opportunities’ value in the parent company through each corporate venturing mechanism? How to increase that speed? Are they different by mechanism? What are the quicker mechanisms? How much time should I wait before killing the collaboration with a start-up? These are data that they usually don’t have because of the novelty of the concept and the lack of historical data.

Based on 120+ interviews with firms’ chief innovation officers (and those in related roles) in the United States, Europe and Asia – the new study “Open Innovation: Increasing Your Corporate Venturing Speed While Reducing the Cost” covers those answers.

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Speed: A competitive advantage to seduce start-ups

For corporate venturing units such as AT&T Foundry, the agility has become a competitive advantage to attract the best start-ups, which usually have quick paces because of cash flow scarcity. The time span of the relationship between the corporate and the start-ups ranges from the identification and collaboration with the opportunity (i.e., discovery, start-up or scale-up), to the integration of value into the parent company – where integration step usually takes the longest. For example, the average time for the identification stage could require anywhere from one to five months depending on the utilised mechanism, while the attraction and integration stages are much longer, ranging from one to 11 months and four to 18 months respectively.

Months required per stage and mechanism (mean)
(Source: prepared by the authors)

What do “hares” do differently?

What separates the faster “hares” from the corporate “turtles”? The new study identifies several differentiators including:

• Being skeptical about corporate incubators. Evaluate other mechanisms that may give you more with less. For instance, the venture client entails around a third of the time that corporate incubators require, on average.

• Using data – instead of relying on intuition or following media hype – when choosing the optimal combination of corporate venturing mechanisms and when identifying bottlenecks at the stage they occur – either during identification, collaboration or integration.

• Optimise your venturing process by granulation. Identify the stage of the corporate venturing process in which you have a break or bottleneck (i.e., identification, collaboration or integration), benchmarking with other players.

• Be the “sexy” corporate among start-ups. Fight to become the player in your industry with which start-ups most want to work because of the unique value proposition you are offering to them. Reflect on how start-ups perceive you – either as a supporter or as a “thief” of intellectual property.

• Adopting “agile principles”. These include delegated authorities; flatter, faster, simpler structures; freedom to test new ideas; modular processes; bureaucracy aversion; ownership mentality; and a bias to action. Agility is especially key in the integration stage, the report notes.

These insights will help leaders define more accurately their corporate venturing strategies and select more appropriately the combination of corporate venturing mechanisms. Additionally, it will help innovation managers to have a benchmark to compare themselves, and check whether they are going too slow.

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About the Authors

(left to right)

Mª Julia Prats, IESE Business School Professor Josemaria Siota IESE Business School Director of Research (EIC), Celeste Saccomano IESE Business School Researcher, Isabel Martinez-Monche, BeRepublic Managing Director (Business Strategy), Yair Martinez BeRepublic Digital Business Strategist.