3 Reasons Why We Like to Share the Risk in Our Venture Building Projects

Christoph Hornik
How does sharing the risk with our corporate partners helps overcome some of the challenges of venture building and creates more sustainable businesses in the long run? Christoph Hornik explains.
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Corporate Venture Building projects are complex interactions between multiple stakeholders who decide to set up a venture together. Naturally, such innovative endeavours come along with a certain amount of risk. The key task for us as venture builder is to systematically reduce this risk, thus increasing the likelihood of young companies succeeding and helping our corporate partner innovate sustainably. 

On the one hand, we bring the right skills and entrepreneurial mindset into the project. Most of our venture managers have previous founding experience, and we have founded dozens of startups through our accelerator as well as advised hundreds more along their founding journey. Additionally, we work with tools that help us de-risk innovation projects daily. Whether it’s about doing customer interviews, market research or quantitative tests to validate business models – our team brings deep methodological knowledge to the table.

The second ingredient in our recipe is risk sharing with our corporate partners in specific venture building projects. We do this by co-investing into the new venture through non-monetary investments and therefore receiving an equity stake. Usually, the decision of a co-investment happens when we can already foresee a possible solution and market. By conducting this initial due diligence, we, and the corporate partner, can better understand and evaluate the underlying opportunity.

In the following article, we will explain why we believe that risk sharing is a crucial driver of success in Corporate Venture Building projects and how we take advantage of this tool to kickstart successful new ventures and help established companies become future-proof.

1. It increases the commitment of everyone involved.

First off, sharing risks means that we become a shareholder in the new venture, thus increasing our skin in the game through the added upside potential in the future development of the business.

As a result, our operative venture team also has a similar intrinsic motivation as co-founders in regular startups, resulting in a long-term commitment toward common goals. Even though it is always our philosophy to be curious and do everything we can to overdeliver on our promises, we have seen our venture teams become even more ambitious. As everyone involved is aware that they are building a new solution that influences their daily work and shapes their career in the long run, they go above and beyond in achieving milestones and creating new opportunities in our corporate venture building projects.

On the other hand, sharing the risk also increases the commitment of our partner. By making the project a joint venture, we have experienced that also individuals from the corporate side identify themselves as co-founders of this new venture, dramatically increasing their opportunity awareness and solution orientation. Additionally, it creates mutual trust and the ability to work together as a real startup team. As we also have skin in the game as venture shareholders, all parties involved are strongly aligned towards a shared goal.

2. Providing long-term guidance through our steering board 

Whenever we co-invest into a new corporate venture and therefore share the risk, we also position our partners, some of our most experienced team members, as well as ex-founders on the steering board of the business. This way, the operative team has highly experienced strategic advisors with a broad domain or founding experience to support them.

The steering board comprises representatives from both sides – the corporate & the venture builder. It acts similar to the board of a startup, where strategic actions are aligned to the venture’s long-term vision. The main task of the steering committee is to regularly come together to discuss and reflect on the learnings so far and make strategic decisions based on them. Additionally, it acts as a vital intermediary in the company, enabling the venture to take advantage of the corporate network to source domain expertise and contacts.

In the long run, the board performs essential steering and governance functions of the venture, even in the years following the legal formation of the separate business. As a result, the venture profits from the know-how and experience of our team even after a new operational team is put in place in the future.

3. Create eye-level interactions

When we found new ventures with corporates, we strive to be partners rather than falling into supplier-buyer relationships. We aim to build new solutions and business models cooperatively by leveraging our methodological expertise and experience in building startups and the corporate’s industry know-how, network and resources. While we bring our assets into all of our innovation projects, the full potential of those is only unleashed when we can fully embark on a long-term cooperative partnership, creating continuing synergies and learning experiences.

We have learned that to create this cooperative environment with our partners, it is crucial to meet each other at eye level, no matter the hierarchy of the parties involved. By sharing the risk and equity of venture building projects, we have realised that the partnership becomes much more evident and ‘real’ for everyone involved. As mentioned above, in a risk-sharing scenario, all venture team members consider themselves co-founders of the new endeavour, meeting everyone else in the team at eye level.

Conclusion

Just like any other type of innovation project, venture building comes with its very own set of challenges and difficulties. There is probably no other form of corporate innovation method where the corporate works so closely with team members of the external agency – building an entirely new venture over a significant period. We like to share the stake with our corporate partners to reduce some risks and challenges attached to venture building. We have realised that getting skin in the game by becoming a shareholder in the new ventures has helped our partners and us tremendously to overcome some of those difficulties and create more efficient businesses together with our co-founders from the corporate side. Do you want to learn more about our approach to venture building? Then this is the right spot for you: book a free initial consultation with our expert venture leads now!

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