Corporate Venture Capital refers to Venture Capital investments made by large corporations. Large corporations may do this in different ways :
- Investment in Venture Capital funds - this is often used by companies to learn the skills of independent funds. However, this method provides very little strategic benefit since corporate interactions with portfolio
companies are minimized.
- Investment through dedicated VC funds - companies may invest in Venture Capital firms that offer a variety of special accommodations to their strategic need. The company may also make direct second round funding investment
in portfolio companies.
- Corporate direct investment - in this case, companies acting as VCs engage in direct investments in portfolio companies. The company may also co-invest with independent VCs to leverage their ability to source deals and
monitor companies.
The focus of their investments, like specialty funds, is mostly on companies within their own industries. Many, however, invest in companies where the product, market, or technology is related to the parent
corporation's operations or whose business provides a diversification opportunity. Sometimes, larger corporations make equity investments in promising ventures in order to incubate future acquisitions that could eventually become
new divisions.
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