JLL Spark’s CVC series, part 1: The goal of corporate venture capital
Corporate venture vapital (CVC) has captured our attention for a couple of decades, having started off in high tech companies and steadily expanded more broadly into other industries such as FinTech as well as carbon and emissions tech in recent years. As the cousin of the Venture Capital scene, it counts more than 2,000 corporations in its ranks. And yet we would argue that it is still largely misunderstood.
With that in mind, we’re kicking off a series of blog posts to help explain what CVC is and why JLL started JLL Spark Global Ventures in 2017.
The problem for large successful companies is… how to stay being a large successful company. Being good at providing goods and services that customers like and are ready to pay for is a positive thing. But, over time, competitors arise, tastes alter, and new products are launched. Previously (perhaps dating back to before the advent of the personal computer and widespread adoption of the internet) the pace of innovation wasn’t quick, and limited to a well-defined set of providers, meaning that changes arrived slowly. In today’s world, these things happen quickly, and the competitive set is hard to define, or even keep track of.
The goal of CVC is to help corporations stay ahead of these changes while capitalizing on the new knowledge and expertise being developed by startups. CVC doesn’t replace internal R&D efforts (although the money devoted to such efforts has diminished over time), but supplements it, providing optionality and choice for the future. Often internal R&D is aimed at incremental improvement, whereas startups are trying for disruptive change, having no installed base or material revenue streams they need to protect.
That said, working with startups is in many ways an ‘unnatural act’ for corporations; i.e. not the usual way that they work, and so requires careful setup and execution. Large companies plan far in advance, build and control integrated product roadmaps, and hire internally and externally the people needed to execute. From the type of work required (early stage investing), to working with startups where control is not an option, to team composition and compensation, it’s sometimes a struggle for large companies to create a structure that works internally and externally and isn’t disadvantaged in the highly competitive VC market.
Over the series of CVC posts, we’ll cover:
Why JLL Spark exists – how we bring innovation to JLL and the commercial real estate industry
The trifecta of success – making it work for your clients, your portfolio or startups and your organization
Crossing the internal chasm – working with the rest of your organization to maximize the chances of the external innovation taking root
The future of corporations and startups working together – thinking about models of inside-out and outside-in innovation to stay ahead of the game
By the end of the series, we hope to illuminate why CVC is a valuable addition to the innovation toolkit that every corporation should have, and that you will have gained insight into how corporate venture capital works, how companies can maximize success from the model, and how JLL Spark in particular is solving the challenges to deliver lasting value to JLL, its clients, and the startups that we invest in.
Written by Raj Singh, Managing Partner at JLL Spark
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