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Venture Capital (VC) has been around for ages and remains, to this day, one of the best-known (and most widely used) tools to nurture ventures with high-growth potential.
Traditionally, venture capitalists invest in (and sometimes advise) promising young startups, enabling them to scale and provide profitable returns. But in recent years, their MO has begun to shift, particularly in corporate settings (i.e. CVC units), giving way to a new model: the VC community or platform.
Under the new paradigm, the goal is not only to get a solid return on investment but to build an ecosystem that includes (and benefits) investors, founders, VC partners and industry experts. The goal? To capitalise on the knowledge and collective intelligence of the community, benefiting all members and fueling startup growth. In essence, VC communities help ensure your expertise increases exponentially with each new venture added.
In this article, we’ll explore some of the benefits VC communities can bring to corporations (CVC units) and how to create a community of your own. But first, a bit of context.
What exactly is a CVC unit?
For CVC units, the main goal is to create a competitive edge for its parent company by providing access to innovative technologies, business models and value propositions. In a nutshell, they help corporates expand their market share, diversify their portfolio and unlock valuable new revenue streams.
Unlike VC firms, CVC units tend not to use third-party sources to fund their startup companies. In most cases, the ventures are funded by the corporate itself. Successful ventures eventually get merged into the corporate or become independent spin-offs.
Examples of successful Corporate Venture Capital players include Google Ventures, Tin Shed Ventures and Novartis Venture Fund.
Download this report to learn more about the different types of corporate venture unit strategies you can use to diversify your portfolio.
Why build a VC community?
Today, there are over 1000 active VC firms in the US alone. That, combined with the growing number of business units, accelerators and CVC units springing up around the world every day, has made the landscape more competitive than ever. In other words, to attract the most promising startups, CVC units have to differentiate themselves from the competition. That’s where VC communities come in.
Creating a VC community of portfolio companies enables CVC units to provide value beyond the typical funding, mentoring and advisory services. It creates a space for knowledge sharing, open discussion, networking and business development opportunities, which, in turn, leads to higher venture capital performance.
For both VC firms and CVC units, leveraging the power of their community means an infusion of expertise through advisor networks. This provides every member of the community with expert advice from experienced sources:
- Senior entrepreneurs with industry experience
- Experts in tech, legal and relevant industries
- Members with access to valuable networks
This, in turn, frees up the venture capitalists to do what they do best, invest and grow the portfolio.
VC firms like Work-Bench, Spark Capital, and 500 Startups and CVC units like BASF Venture Capital and Verizon Ventures are already implementing their own communities with stellar results.
How do you build a VC community?
The first step to building your own VC community is to figure out what your needs are, e.g.,
- What will your focus be?
- Will your community live online, offline or both?
- What kind of knowledge do you wish your community members to share?
No matter which direction you choose to take, here are some core principles to keep in mind when building your community:
It should facilitate connections
One of the key factors that make VC communities so successful is their ability to foster connections that lead to knowledge sharing. Make sure your community brings together different profiles in your ecosystem (e.g. sales, legal, founders, partners, investors, etc.) and provides a space for networking, asking questions and sharing experiences.
This could be done by organising in-person group events, small dinners, one-on-one meetings, roundtables and/or virtual events where profiles can forge deeper connections.
It should provide centralised insights
Knowledge sharing between one or two people is useful, but its value grows exponentially when it can be accessed by the entire community. Find ways to track and centralise the ideas and insights shared so that everyone can benefit from them (e.g. polling, newsletters, feedback groups etc.).
You can also use a CRM system to manage different knowledge sources in your community and track each member’s engagement history.
It should include an online element
Adding an online outlet for your VC community to share ideas makes it easier for them to stay connected no matter where they are. It creates a space where founders can share issues and experiences and advisors can share solutions, all in a matter of minutes from anywhere in the world. Good places to start include Whatsapp, Slack and Google Groups.
Additional things to consider include:
Open vs closed communities
While closed communities are easier to manage, open communities enable you to gain and share insights with a broader public. The best way to choose is to consider which model best suits your broader goals.
A sponsorship role
In many cases, companies “sponsor” specific communities (e.g. meetups, roundtables), taking the role of host and making resources available. This is a good way to take a neutral stance (i.e. as an endorser or sponsor) and create an unbiased, nonpartisan environment.
Final thoughts
There’s no one right or wrong way to build a VC community, but in most cases, the key to success is to create a space in which each member is engaged, actively involved and knows what his or her role is. This will ensure that each person contributes to the health of the community as a whole, and it won’t be long before you start seeing the benefits.
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Want to build your own corporate venture arm? We can help you build a strategy that leverages your unique corporate assets to create a pipeline of profitable new ventures.
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