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1、1 Considerations When Fundraising for Corporate VenturesBy Hanno Stegmann,Neels Steyn,Melissa Lou,Christine GiamConsiderations When Fundraising for Corporate Ventures2 Considerations When Fundraising for Corporate VenturesMomentum around corporate venturing has steadily increased over recent years.I
2、n Singapore,for example,approximately 80 new corporate ventures have been launched since 2018 according to data by the Economic Development Board(EDB).There are already some remarkable breakout success stories in the Southeast Asian corporate venturing landscape.Fintech giant Ovo,incubated by Lippo
3、Group in Indonesia,has delivered exceptional growth.Since its launch in 2017,Ovo saw its valuation surge to more than US$2 billion,as per last known public valuation,before its subsequent acquisition by tech giant Grab in 2021.Generally,there are two different approaches as far as positioning a corp
4、orate venture within its parent organization is concerned.Strategic value creator.A venture that is typically 100%owned by the corporate partner(fully owned subsidiary),with products and services often strategically tied to the direction of the corporate strategy.Independent value multiplier.A ventu
5、re that is less integral to the corporate parents strategic direction,but rather serves to generate financial returns,or deliver an increase in enterprise value multiples for the corporate partner.01Considerations when fundraising for corporate venturesCorporate venturing has emerged as an advantage
6、ous avenue for companies seeking to drive growth,innovation,and digitization in recent years.This exciting new asset class not only enables and empowers strategic innovation,but also enhances enterprise value.Considerations When Fundraising for Corporate Ventures 3BCG XWith rapid expansion in the in
7、dustry and a growing number of corporate ventures achieving scale,we are beginning to see more corporate ventures accessing capital from external investors to empower long-term growth ambitions.In collaboration with BCG X,the tech build and design unit of Boston Consulting Group(BCG),EDB and its str
8、ategic investment arm,EDBI,have identified several key considerations to guide this journey.These considerations aim to maximize value for partner organizations and investors to ensure corporate ventures yield optimal results.BCG X4 Considerations When Fundraising for Corporate VenturesVentures cons
9、idering their fundraising options have a number of questions to consider when deciding which path to pursue.One prominent question revolves around the source of funding,and whether a corporate parent would utilize its own balance sheet to fund the venture or raise money from external partners.In man
10、y cases,corporate partners have the ability to fund their ventures internally,but funding alone is not the only consideration in deciding on a capitalization approach.Ventures may identify investors and partners as offering further strategic value to maximize the potential of a corporate venture inv
11、estment.“Most corporations always have the funds.What they and their ventures need to understand is what other areas they need help on besides money.Sometimes,this entails seeking external help from someone that adds strategic value to the venture,”says Christine Giam,Partner(New Ventures)at EDBI.Fo
12、rmalizing strategic partnerships is often a key reason corporate ventures consider raising capital externally.This provides a pathway for the venture to gain strategic value from investors in areas where internal capabilities may be more limited.There are some valuable examples of strategic partners
13、hips which have adopted this approach.In 2020,Boost Holdings,e-wallet and digital financing venture from telecommunications operator Axiata Group,successfully raised US$70 million in funding from Great Eastern Life Assurance.This funding enabled Boost to help develop its ecosystem of partners and ra
14、pidly accelerate growth,leveraging the domain expertise of its strategic investor.02External fundraising can enable strategic partnerships and provide funds to realize growth potential“Considerations When Fundraising for Corporate Ventures 5BCG XCorporate ventures looking to fundraise should conside
15、r three important aspects of their strategy:Structure and governanceBalance of neutralityValuation and potential exit 123Consider-ations for Effective fundraisingStructure and governance1Valuation and potential exit3Balance of neutrality2Structure and governanceIn the earlier phases of a ventures de
16、velopment,the majority of ventures are fully owned by their corporate partner and structured as a business unit under the parent organization.This can be an effective structure in the early stages,particularly when teams are especially reliant on their parent organization.However,as a new business a
17、chieves scale,this structure can pose some challenges.There are 3As to note when balancing the structure and governance of a corporate venturethe balance of agility,autonomy,and accountability.The 3As of agility,autonomy,and accountability are critical considerations in ensuring effective structure
18、with robust governance.AgilityRapid iteration and agile ways of working are vital to venture growth.Corporations must consider where standard corporate processes limit a ventures ability to make decisions fast and undertake rapid iteration cycles.An effective structure and robust governanceAgilityAu
19、tonomyAccountability+6 Considerations When Fundraising for Corporate VenturesConsider an example of a high-growth venture generating US$10 million in revenue.In this scenario,the venture CEO may still need board approval to utilize US$50,000 in unbudgeted expenses,significantly slowing the ability t
20、o make key decisions,with potential negative impact on growth.One common response is to assign an internal champion to help represent the interest of a venture within the corporate partner.These internal champions help propel venture initiatives forward,but they have limited effectiveness when compa
21、red against the true flexibility of a fully agile operation.If integrating ventures into corporate processes provides a barrier to agile support,another option is to consider establishing a separate legal entity with its own autonomy to empower agile operations.AutonomyAutonomy should be a fundament
22、al consideration in any transition from parent company control to a separate legal entity.Corporate partners should ask how much autonomy should be built into this strategy.Considerations include identifying the right founding team and CEO,how the team is incentivized,how incentives are matched to v
23、enture performance,and the processes needed to empower the team to make key business decisions.With increased autonomy,it is essential to invest time to find the right-fit team.Its also vital that corporate partners design a fit-for-purpose governance structure to help mitigate business risks,while
24、empowering decision-making and ensuring the ability of the venture to move fast and scale rapidly.Corporate partners may also want to consider issuing employee stock options to the venture management team,ensuring their incentives are aligned to help grow the venture.This is also a key consideration
25、 for external investors when evaluating companies they plan to invest in.Investors prefer that management teams are adequately incentivized to make the best decisions for the company because they also have a vested financial interest in the businesss success.AccountabilityCorporate partners also nee
26、d to address how they can establish accountability when a venture manages their own entity and governance.Some ways this can be achieved include:embedding a team member from the corporate into the ventures new management team,or ensuring that the board is represented with at least one member from th
27、e corporate partner.Accountability needs to be achieved from both parties as the corporate venture scales and becomes its own entitycorporate partners need to be equally accountable to ensure that a deliberate structure is in place to ensure strategic advantages are well established and accessible t
28、o the venture team.Considerations When Fundraising for Corporate Ventures 7BCG XBCG XBalance and neutralityBalancing neutrality in the market is an important aspect for a ventures success.Consider the case of a corporate venture which aims to create a marketplace.Within months of launching,they enco
29、unter difficulty in acquiring suppliers and customers due to market participants being competitors and clients of the corporate partner.Ownership and neutral representation become ever more important when a venture has multiple ecosystem partners in their offering.A relevant case study can be seen i
30、n heyCar Groupa trusted used car marketplace in Europe launched in 2017,funded by automobile group Volkswagen.Since its launch,heyCar has carefully maintained a neutral market position,featuring products and services from all automobile manufacturers.Broadening its investor base beyond Volkswagen an
31、d adding Daimler,Renault and others as investors has helped to underline its positioning as neutral ecosystem player.Valuation and potential exitExternal investors will evaluate corporate ventures as they would any early-stage investment fundamentally looking at the ventures performance and traction
32、 in market as key evaluation criteria.Corporate ventures have the advantage of having a corporate parent,able to nurture the venture to a meaningful point of traction before the need to raise funds.This provides a stronger fundraising position than a typical early-stage startup with little resources
33、.Corporate partners and their ventures can,for example,sign co-development agreements where they align on achieving a certain level of traction or annual recurring revenue before they seek to raise funds externally.8 Considerations When Fundraising for Corporate VenturesIts important for corporate v
34、entures to showcase and demonstrate how they continue to benefit from strategic assets and advantages provided by their corporate partnerincluding brand recognition,ecosystem opportunities,and other benefits.Beema,a Dubai-based insurance innovator incubated by the Emirates National Oil Company(ENOC)
35、,offers customers a cashback reward based on the number of kilometers driven annually on a pay-per-kilometer policy.Beemas success is largely attributed to,and aligned with,ENOCs footprint of car inspection centers that allows them to accurately validate this data.With regards to planning for a pote
36、ntial company exit,there is a delicate balance for corporate ventures to maintain.Often,in the later stages of a ventures journey,investors will typically agree on a timeline with the internal management team to sell or IPO the company.With corporate ventures it is no different,and essential that th
37、e corporate partner is equally aligned on this schedule.This is a common theme,but it is by no means always the case according to Christine Giam.“In some cases,the corporate venture has such strong strategic value and the corporate may not want to exit.Sometimes,this means putting themselves up as a
38、 potential buyer of the venture,which is acceptable as long as they do not lock up the ventures growth or possibility for other exit options.”“Considerations When Fundraising for Corporate Ventures 9BCG XExternal investors will evaluate ventures against the same metrics they do any other startup,but
39、 the unique dynamics of corporate ventures means the parent organization should carefully consider elements such as structure and governance to ensure the venture has the greatest chances of success.Balancing neutrality is also vital,ensuring that ventures are able to effectively serve customers and
40、 compete in the market.Appropriate incentivization is the third and final consideration,with performance-based renumeration that adequately incentivizes founding teams,backed by a clear exit strategy.With these three pillars in place,corporate ventures can operate on a firm foundation,providing a pl
41、atform to unlock benefits for both corporate partners and external investors alike.03Conclusion:Learnings and takeaways when it comes to fundraising for corporate ventures10 Considerations When Fundraising for Corporate VenturesAbout BCG XBCG X is the pioneering new tech build and design division of
42、 Boston Consulting Group.It is uniquely positioned to support companies in Singapore seeking to kickstart the journey to new markets through venture opportunities.BCG X brings together advanced tech knowledge and ambitious entrepreneurship experience to turbocharge BCGs trusted corporate offering.Th
43、e division is positioned to help organizations embrace,enable,and succeed in delivering innovation at scale,backed by over 3,000 technologists,data scientists,programmers,engineers,and human-centered designers located in more than 80 cities across the globe.About the Singapore Economic Development B
44、oard(EDB)The Singapore Economic Development Board(EDB),a government agency under the Ministry of Trade and Industry,is responsible for strategies that enhance Singapores position as a global center for business,innovation,and talent.We undertake investment promotion and industry development,and work
45、 with international businesses,both foreign and local,by providing information,connection to partners,and access to government incentives for their investments.Our mission is to create sustainable economic growth,with vibrant business and good job opportunities for Singapore and Singaporeans.For mor
46、e information on EDB,please visit www.edb.gov.sg.About EDB New Ventures EDB New Ventures is the venture-building arm of EDB.Its aim is to support the creation and scaling of high-potential new ventures from Singapore to become globally leading businesses.It actively works with established companies
47、on corporate venturing,as well as prominent business leaders and serial entrepreneurs to build these new ventures.In addition to catalyzing the venture building ecosystem in Singapore,EDB New Ventures provides for our partners and portfolio ventures access to industry networks,expertise,talent,and r
48、isk-sharing capital.About EDBIInvesting since 1991,EDBI is a Singapore-based global investor in select high-growth technology sectors ranging from information and communication technology(ICT),emerging technology(ET),healthcare(HC)and promising Singaporean SMEs in strategic industries.As a value-cre
49、ating investor,EDBI assists companies achieve their ambitious goals by leveraging our broad network,resources,and expertise.With our growth capital,EDBI supports companies seeking to grow in Asia and globally through Singapore.For more information,visit https:/.04About BCG X and EDB SingaporeConside
50、rations When Fundraising for Corporate Ventures 11BCG XThis article is written as part of the Corporate Venture Launchpad 2.0,an expanded S$20m programme by EDB New Ventures designed to enable companies to incubate and launch a new venture from Singapore,supported by venture studios experienced in c
51、orporate venture building.BCG X is proud to be an appointed venture studio of the programme.BCG XIn association with12 Considerations When Fundraising for Corporate VenturesThe future awaits.Read more about how corporate ventures can succeed in Singapore at www.edb.gov.sgRead more about BCG X at X contact:Hanno Stegmann,