16 l ENTREPRENEUR l JULY 2019
Separating Fact From Fiction in
Corporate Venture Capital
Aldi Adrian Hartanto, Head of Investments, MDI Ventures
M
any tech
industry
stakeholders
in Asia
believe
the word
‘corporate’ implies that a
venture capital firm lacks
independence and autonomy;
that it is the mirror image
of its corporate backer and
therefore must carry out its
agenda. But this is a myth,
and couldn’t be further from
the truth. Recent data shows
that 2018 saw a surge in
corporate venture capital
(CVC) activity worldwide. The
second quarter alone clocked
a record 757 CVC deals and
US$14.1 billion in funding.
For the entire year, there were
2,740 deals on record, while
US$53 billion was disclosed
in CVC funding for tech start-
ups. This is an astonishing
increase from US$36.1 billion
the year before.
Asia attracted 38 per cent
of all CVC deals in 2018, up
from 31 per cent in 2017.
In the third quarter, Asia
overtook North American
deal share for the first time
and CVC accounted for 38 per
cent of all disclosed funding
for tech start-ups in Asia.
Yet, there are a slew of
public misconceptions about
corporate venture capital that
has for years been accepted as
truth. Let’s separate fact from
fiction.
Fiction: CVC Firms are Slow
A lot of start-ups and
investors in Asia think that
CVC firms are controlled by
their corporate ‘parent’ firms,
and therefore must service
the corporate agenda. This is
not true. Firms like ours are
independent entities with
autonomous teams.
In many cases, CVC offers
startups the best of both
worlds. Founders get capital
injected quickly after raising
a funding round. There is
no undefined waiting period
when well-oiled corporate
governance takes effect.
Corporate venture initiatives
have the cash on hand to
make these moves quickly
after term sheets are signed.
Founders also get a real
bridge and network in the
corporate world, a place
they must go for clients and
partnerships if they hope to
achieve meaningful scale.Fiction: CVC Funds are Off-
limits to New Players
In many cases, the corporatedoes not dictate who the firm
hires or which startups it
invests in. Many CVC funds
in Southeast Asia are open
for other local and global
investors to come in as
limited partners. CVC firms
like ours routinely co-invest
with other non-corporate
players and are often
welcoming other strategic
backers to their rosters of
smart-money benefactors.Fiction: They Ony Recruit
from the Corporate World
CVC firms in emerging
markets like Indonesia
recruit team members on a
‘pro hire’ basis. This means
that they prefer to work
with people who have real
experience, culture fit, and a
proven track record when it
comes to start-up investing
in the region. CVC teams are
not usually plucked from
comfortable corner offices.
In reality, they rarely consist
of people from unrelated
sectors.Fiction: CVC Funds Don’t
Tend to Perform Well
This is just not the case.
While many CVC funds in
Southeast Asia have failed
to bridge the gap between
corporates and start-ups,
others are starting to succeed.
The idea that corporate
venture capital is a slow,
bureaucratic and an
inefficient strategy is a
stereotype that we need to
dispel, if only for the sake of
savvy founders and funders
alike.“The idea that
corporate
venture capital
is a slow and
an inefficient
strategy is a
stereotype
that we need to
dispel, for the
sake of savvy
founders and
funders alike.”
EXPERT
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