Getting into the world of venture capital is indeed a financial decision. Yet to the right investors, it is also strategic, as VC investing can enhance the culture of your company, provide access to innovation and drive growth in the community in which you operate.
To understand the value of venture capital, you first need to expand your definition of value creation. Corporations are moving away from the idea that the only form of value is share price. In the 2019 U.S. Business Roundtable, corporate leaders released the “Statement on the Purpose of a Corporation,” outlining the belief that improving quality of life, fostering innovation and upholding the community are all important ways to create value in the long term rather than just the immediate bottom line for shareholders.
This idea of long-term value creation is an important understanding when getting into the world of venture capital. Investing in something like a venture capital fund of funds is not only a valuable financial decision for your bottom line but also a way to catalyze progress, ultimately creating more value in your community for today and the future. Here are some ways corporations are fostering innovation today:
Collaborations between universities and the private sector have proven to be high-value, high-return investments, and companies are flocking to where the action is. This is evident in the increase from $2.4 billion in 2006 to $4.2 billion in 2016 in corporate funding for university research and development.
The symbiotic relationship benefits both parties. Overall, as companies have been reducing their spending on early stage research for the past three decades, universities are filling that role. For universities, the collaboration helps foster a culture of entrepreneurship among ambitious students and faculty looking to make an impact in a time when global problems require innovation.
You do not need to look any further than the Midwest to find success stories of corporate-university collaboration. Minneapolis continues to grow to be one of the largest medical-technology centers in the world, with University of Minnesota’s Earl E. Bakken Medical Devices Center for research driving innovation. Through its “Innovation Fellows” program, the research center, with collaboration from Medtronic, Inc., Boston Scientific Corporation, 3M and other leaders in the medical device industry, has generated more than 200 invention disclosures, five startup companies, 88 patent applications and 26 product licenses.
Investors also have flocked to the University of Wisconsin to fund research. Corporate donors from the state’s cheese and dairy industries funded the creation of the Center for Dairy Research, which has become one of the premier dairy research centers in the United States. The biomanufacturing industry also has invested in university research with the Forward BIO Initiative, a collaborative effort to support technological innovation that translates into commercial products.
Community and economic collaboration is baked into the University of Wisconsin system, with the guiding principle of “The Wisconsin Idea,” which states that university research should be applied to solve problems and improve quality of life for the state of Wisconsin and beyond.
The success of these partnerships should indicate the benefits of collaborative corporate investments and the potential of growth in this avenue of investing.
In Michigan, Renaissance Venture Capital Fund has invested in VC funds across the country to introduce them to and stimulate Michigan’s startup ecosystem. Through its first two funds, Renaissance has helped the creation of 39 startups and has attracted $1.3 billion dollars back to the state.
Meanwhile, corporate investors have benefited by being connected to new technologies and being introduced to “hidden gem” opportunities, according to Renaissance’s CEO.
In Ohio, Cintrifuse also has stimulated the startup ecosystem by investing in VC funds. Its goal is to make Cincinnati one of the most attractive innovation hubs in the country. Currently, Cintrifuse has more than $90 million in venture capital invested and more than 600 startups in its pipeline.
As for corporate investors, local corporations have benefited from increased access to tech talent that was hard to find even five years ago in Cincinnati, according to P&G’s Steve Bishop.
Overall, investing in venture capital is a way to create and gain access to innovation, and there are a few ways to do it. You can sponsor an accelerator program, as explained in the article, “Why Enterprise Level Companies are Investing in Startup Accelerators and How They are Doing it.”
You also can invest directly into a venture fund that funds multiple startups, or in a fund-of-funds that targets multiple funds. Cintrifuse and Renaissance are examples of the latter, as they sponsor VC funds that stimulate the venture capital ecosystem overall.
At the end of the day, it’s about investing in your own company, investing in your community and investing in innovation.