3 Qualities You Need To Attract Corporate Venture Capital
Corporate venture capital is a growing source of startup funding. Seventy-five of the Fortune 100 are active in corporate venture capital, and 41 have a dedicated team. Top players in the space include Google Ventures, Cisco Investments, Dell Ventures and Intel Capital.
To secure funding and support from corporate venture capitalists, entrepreneurs need to understand the key differences between corporate venture capital and traditional venture capital. We interviewed Christine Herron, Managing Director at Intel Capital and co-leader of its $125 million Diversity Fund, at a recent SF brunchwork at Alloy Collective, an award-winning collaborative workspace, arts & innovation hub.
Intel Capital is one of the most active corporate venture capitalists in the world with over $566 million invested in 2017. Herron, who was previously an investor at First Round Capital, shared three strategies for entrepreneurs seeking corporate venture capital funding.
1. Build a diverse team
The diversity of the founding team plays an important factor in Intel Capital’s investment decisions. A startup with a diverse founding team is able to pull from a range of different backgrounds, experiences and skillsets.
Intel launched a dedicated Diversity Fund in 2015 with a $125M commitment. “You have to find diverse teams. They exist. Go find them,” Herron said.
Each investor at Intel Capital looks for diversity no matter their vertical. The fund’s definition of diversity has expanded over the years. Herron explained, “We want to pay attention to not only women and underrepresented minorities. We are actively looking for people with disabilities, members of the LGBTQ community and those in military service.”
Herron revealed that she looks at three other factors when making investments: team, products, and customer acquisition. “Many investors follow that. Others may say team, products, and market size,” she said.
2. Lead with the numbers
Even though financial return-on-investment may not be the primary reason why corporate venture capitalists back a company, they still want to hear the numbers first. Corporate venture capitalists may invest in a company for strategic reasons. For example, a startup may be working on research or product development that the company could implement or use to improve its existing offerings.
Corporate investors have a higher bar to pass because their dollars don’t have to go exclusively to startups. They can also go to R&D spend, for example.
“If the strategic value of the return isn’t demonstrated in some way, that deal is not going to get done,” Herron said.
Investors hear thousands of pitches so you need to capture their attention within the first few seconds or they will tune out. Many entrepreneurs feel the need to explain how they came up with their financial projections and reveal the numbers at the end. Herron said,
“We want the numbers first.”
“A good investor is going to ask about the how and why,” she added.
3. Follow the trends
Intel Capital has shown a lot of interest in companies that are data-focused, recently investing $60 million across 15 startups.
Herron is excited about companies that are creating natural interfaces for IoT. Natural interfaces, whether it is through ambient computing or voice-controlled devices like Alexa, are changing the way that humans interact with technology and making those experiences more natural.
To stand out, Herron said that entrepreneurs need to ask: “If you have all these smart things around you, how are they making your life better?
Posted with permission of Forbes Media LLC
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