CVC, or corporate venture capital, can play a pivotal role in the innovation roadmap of a company. The quality of the startups within your network is critical in how successful your CVC will become. Regardless of whether the focus of your CVC is on return or strategic fit, the importance of the caliber of startups you interact with is identical. Deal flow is a product of two important variables that any venture capital firm needs to possess: volume and quality. While quality is self-explanatory, a high volume is necessary because most startups you meet with will not meet your investment criteria.
At the heart of improving your deal flow is building your professional network, as this helps to bring inbound investment opportunities as well as unique insights into specific industries. The following five avenues show effective methods of augmenting your sourcing capabilities and network as a CVC.
1. Institutional Investors
Building relationships with institutional venture capital firms is arguably one of the most important ways to increase your deal flow. Institutional investors (IVCs) have a plethora of startups that come through their doors and having access to the relevant startups within that group can be a valuable asset.
Additionally, IVCs have a gargantuan network of their own as well as investment experience that some corporate venture funds might find useful. This combination of volume and quality that most IVCs possess make it a powerful ally for any corporate venture arm.
CVCs can provide value to these IVCs primarily by providing two resources. One is by becoming a domain expert in several specific fields and a diligence resource for the IVC in these areas. Secondly, being a great strategic partner for future portfolio companies can be a huge value-add as well. The CVC’s advantage in this respect is the access it has to the industry executive network and the ability to be a lucrative commercial partner for the startup.
A key part of increasing your deal flow is putting yourself in places where startups tend to congregate as well. One of the main ways to do this is by attending technology and innovation conferences.
A few examples of these types of conferences include South by Southwest (SXSW), CES, and even industry-specific ones like Insurtech Connect (ITC) for the insurance industry. Attending these conferences gives you access to thousands of startups, many of which are looking for funding as well.
These conferences also allow CVCs to create a relationship network that could increase their deal flow through increased exposure. Other types of conferences include CVC-specific conferences like GVCI, where CVC thought leaders come to share their expertise and experiences.
Accelerators also provide another route to startups and increasing both volume and quality of deal flow. Like IVCs, accelerators are valuable in the sense that there is some internal vetting on behalf of the accelerators, so the startups you have access to are more likely to be higher quality.
If your company has one, internal accelerators are a great way to have almost proprietary access to quality deal flow that has strategic fit. Partnership with external accelerators like Plug and Play can give you access to thousands of startups, some of which might be found in programs that are specific to your industry.
Just as conferences increase your deal flow through sheer exposure to a large number of startups, the Internet is an even vaster resource. There are several platforms that specialize in technology and startups, such as AngelList, CrunchBase, Kickstarter, CB Insights and others.
To continue the conference analogy, there are several industry-specific websites and newsletters that cover the areas you would like to increase your exposure to. Making use of social media, especially Twitter and LinkedIn, can not only increase your inbound deal flow but provide access to industry knowledge and startups in your industry. Being proactive in improving your deal flow is an essential step to being successful in doing so.
5. Within the Company
Lastly, CVCs can look within their own company to increase their deal flow. One method of doing so is collaborating with innovation teams or sourcing teams to have access to their source of startups. Another method of increasing deal flow is through an internal R&D team or intrapreneurship program, which could lead to new products and business lines that stem completely from within your current company.
However, one of the most potent methods of increasing deal flow from within your company is through increased interaction with your business units. Not only can business units be a source of deal flow through the companies they meet on their own, but they can also be a resource for you to use on your startup outreach to provide value to them. If you know that a business unit is willing to work with a startup with a particular solution, this could be a useful way of attracting quality startups to increase your investment deal flow.
Successful means of sourcing startups are essential for a successful CVC. In other words, with great sourcing comes great investability.