What is Corporate Venture Capital?

Corporate venture capital refers to the venture capital activities carried out by non-financial companies with a clear main business, both internally and externally.

Corporate venture capital

This entry lacks an overview map . Supplementing related content makes the entry more complete and can be upgraded quickly. Come on!

Corporate venture capital refers to the venture capital activities carried out by non-financial companies with a clear main business, both internally and externally.

Chinese name

Corporate venture capital

Main body

Non-financial enterprise

Object

Venture capital subsidiary

Types of

Promotional investment, driven investment, etc.

There are two main forms of enterprises engaging in venture capital: ^[1]

1. Driven investment: Start with strategy, and start-up companies are closely linked with the business activities of the investors. For example, Microsoft allocated $ 1 billion to invest in start-ups that help advance the new Microsoft Internet Services Architecture "Net," thereby driving more companies to embrace their standards. ^[2]

1. Legal risk of introducing venture capital ^[3]

1. Enterprises preparing to introduce venture capital need to fully demonstrate the impact of this financing method on corporate technology research and development, corporate equity status, business management, and future development planning; make prudent choices for investment institutions or investors to determine whether the two parties can cooperate Reach consensus on basic levels such as philosophy, cooperation methods, rights and obligations, and sign investment agreements. ^[3]

You can choose to accept joint investment, which helps to obtain funds from more channels or guarantee the source of funds, and can diversify the risk of being controlled by a single investor.

It should be said that venture capitalists invest not only funds, but also their long-term accumulated experience, knowledge, and information networks, all of which help business managers to better run their businesses. Because this is an active investment method, companies that are backed by venture capital are growing much faster than ordinary similar companies.

2. The target of venture capital is mainly those companies that are trying to open up new technology fields to obtain super high profits but lack a lot of funds. Enterprises or professional venture capital institutions and investors who are preparing to invest should choose investment companies and investment projects or technologies carefully. To this end, they can:

(1) Conduct a detailed investigation and evaluation, such as:

Whether the content of investment advice is reliable, whether there are important omissions or concealment;

The actual situation of the invested company's current production, operation, research and development, or market development, and practical problems;

Whether the corporate culture, philosophy, equity status, and management status of the invested company are in line with each other, and whether there are potential hidden dangers that will cause future differences;

Analyze the growth model, capital requirements and financing structure of the company;

Whether the invested project or technology can meet the high-tech standards in a significant sense, and whether there is a tangible prospect to prevent technical fraud.

(2) Hire a professional intermediary service agency to conduct due diligence;

(3) Require the other party to provide corresponding legal documents such as the project, technical feasibility report, and intellectual property status report, and make an agreement on the distribution of responsibilities in the investment agreement for the legal consequences of such documents due to misrepresentation;

(4) Negotiate and sign a comprehensive investment agreement with the invested company, including the mechanism for realizing investment benefits and the withdrawal mechanism for investment funds.

3 Arrange the equity structure and corporate governance structure in accordance with the investment agreement to maintain a balance between the two parties, so that the capital, projects, and technology can be well coordinated to achieve the best results;

4 Co-investors, that is, seeking joint investment from other investors, can not only increase the total investment, but also share the experience of other venture capital institutions or venture capitalists in related fields, mutual benefit, guarantee investment success, and obtain expected returns, At the same time, investment risks have been diversified accordingly.

5. Require investee companies to provide project operation phase reports and combine actual conditions to invest funds in stages to establish that the completion of the objectives of the previous stage will become the basic model for the next stage of investment. At the same time, it also increases its motivation for active production and operation, while reducing investment risks.

Support and supervise the invested enterprises to achieve a win-win situation.