Not content with just engaging with startups, many leading corporates are now experimenting with financial investments, well outside the day job. Given the uncertainty of venture investments, this is not a risk-free approach. And embarking on this journey without a defined purpose or clarity around the type of venturing is likely to yield unimpressive and ineffective results. So, why should you do it?
It’s worth noting that many of your competitors are already far down this path. The number of corporate venturing teams have exploded in recent years, making up 26% of the €147bn total global Venture Capital (VC) investments in 2017. And with VC investors doubling down on retail tech investments in 2018, never has the venturing arena seemed more attractive for a retailer.
Corporate venturing is not a one size-fits-all activity. The form will vary depending on the ultimate goal, whether that be to yield high financial returns, or to arm your company with a better chance of survival in the face of ongoing industry disruption. In order to select the right venturing strategy for your company, it is important to prioritise and assess the options based on relevant cultural and strategic criteria.
For some, establishing venture subsidiaries might fit best, while other organisations might favour some form of joint venturing with a third party.
What have others done?
7 Eleven established 7 Ventures in 2014 to find startups who could fulfil their wider strategic goal of providing customers with a seamless and convenient customer experience. Recent investments have been in KeyMe a startup which has created a secure and convenient way to copy and share house keys, and PayNearMe, a mobile payment platform for cash-preferring customers. 7 Ventures are successfully using venturing to bring fast-paced propositions to their customers.
Conversely, Walmart have used venturing to protect themselves against future industry disruption, and to monitor key industry trends and developments. They established Store No.8, an incubation arm, which scans for entrepreneurs with the disruptive capabilities required to help Walmart become a “next generation retailer”.
With their hands-on approach to venturing, Store No. 8 provide more than just capital investment for startups. Firstly, they identify a business pain point that could benefit from startup engagement. They then design a potential solution and find either an existing startup or entrepreneur who can iterate the idea and finalise a solution for launch. Emerging companies are Spatial&, a virtual reality startup aimed at improving the merchandising process and Jetblack, a text-based personal shopping and concierge service operating in the fast-growing conversational commerce arena.
Even before establishing a concrete venturing capability, there are many ways to look for inspiration from the startup world. Take Asos who recently partnered with Re:Tech, a specialist scouting firm in Tel Aviv, to monitor ecommerce and retail tech startups in a key innovation hub. Asos can assess which startups could benefit their business, while also gaining valuable insight that could inform future venture investment.
Investing in an existing VC fund could lead to lucrative results. Firms like Seedcamp and Northzone Capital have impressive portfolios of early-stage startups and their rigorous application and vetting processes have led to successes such as Monzo, Transferwise and Klarna.
Venturing for ventures’ sake will most likely lead to a waste of company resources and an expensive remediation strategy. It is crucial to choose the right form of venturing for you, depending on risk appetite, capabilities and the progressiveness of the corporate mindset.
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This article was originally published by Retail Week