How does Corporate Venture Capital (CVC) differ from Venture Capital (VC) firms?

VC firms are stand alone entities that develop their own investment theses and raise money from Limited Partners (LPs) that is then used to invest in a portfolio of startups. The investment theses are created by the leaders of the fund based on their joint vision and interests. The General Partners generally control the timing and size of each fund that they raise money for. The funds tend to have a lifespan of 10 or 12 years, which strongly influences the timing and check size that the VC will invest.  When a VC firm invests in a startup, it brings not only an injection of capital, but also the expertise of its partners who will then sit on the board of the startup and offer advice and contribute to corporate governance. There may also be synergies with fellow portfolio companies in adjacent spaces.

CVCs are funded by existing organizations and therefore, their investment theses must necessarily align with the company's overall strategy.  Many CVC funds are set up as an evergreen fund (e.g. next47 was set up with a pledge of 1 billion Euro over 10 years - roughly translating to a rolling 100 million euro allocation. While the evergreen nature of these funds may smooth out the investments over time, changes in leadership and unexpected financial stress in the company are two major factors that could impact the funding, operations, and in some cases, longevity of a corporate venture capital (CVC) fund. On the positive side, the company typically invests in startups that they could serve as a first customer for, so they can be a huge asset to the startup in terms of offering domain knowledge and serving as a testbed for their emerging solutions.

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