Belbin’s Team Roles
- Thinking: plant, monitor-evaluator, specialist
- People: coordinator, team-worker, resource investigator
- Actions: shaper, implementer, completer
Selection and Valuation of Venture Financing
A typical investment decision involves initial screening, information gathering, the assessment of risk, and the evaluation of target entrepreneurial companies.
- VC investments are characterized by high risk duo to illiquidity. volatile returns and lack of information
How to get better at selecting venture? (Yang, Narayanan & Zahra, 2009)
- Experience
- Diversity (stage diversity and innovation, industry diversity and IPO)
- Uncertainty negates some of these effect
The Dilemma of Autonomy versus Coordination (Puranam, Singh & Zollo, 2006)
Autonomy
- Freedom to experiment and innovate
- Not bound by bureaucratic corporate culture
- Prevents corporate employees from impeding the developing of competing technologies
Coordination
- Start-up may use corporate’s knowledge, experience, and capabilities
- Benefits the corporate: the firm can only learn when knowledge is exchanged
- Not only more knowledge exchanged, but also makes sure this ends up in the right place (business units)
(Corporate Venturing) Portfolio thinking
- Includes multiple ties with different ventures
- The success of failure of a single venture is not important to the incumbent firm, but the corporation is able to achieve its goals related to the entire corporate venturing portfolio
Portfolio diversity
The average extent to which ventures in an investor’s corporate venturing portfolio are dissimilar from other ventures within the portfolio
Typical investment decision
Involves initial screening, information gathering, the assessment of risk, and the evaluation of target entrepreneurial companies.
The case for autonomy
- Freedom to experiment and innovate
- Not bound by bureaucratic corporate culture
- Prevents corporate employees from impeding the developing of competing technologies
The case for coordination
- Start-up may use corporate’s knowledge, experience, and capabilities
- Benefits the corporate: the firm can only learn when knowledge is exchanged
- Not only more knowledge exchanged but also makes sure this ends up in the right place
Funding: seed stage
Investments that require funding for product development and team expansion.
Funding: scaling stage
Investments that require funding primarily to scale-up their business
Swimming with sharks dilemma
The choice for a young firm/start-up between a dangerous partner with attractive resources, or a safer but less attractive partner.
Diversity on Innovation Performance
Wadhwa, Phelps & Kotha (2016)
Diversity had an inverted U-shaped effect on Innovation performance
> New-knowledge versus the complexity of integrating new knowledge
Diversity on Financial performance
Yang, Narayanan & De Carolus (2014)
Diversity has a U-shaped relationship with Financial Performance
> Risk reduction benefits versus Redeployment of resources and relevant experience
How can corporate ventures outperform others?
Park and Steensma (2013)
- CVCs tend to elect more innovative ventures, and then nurture them specifically towards higher innovative performance (especially when the investor has more of a say in the investment syndicate
Baum and Silverman (2004); Chemmanur et al. (2011); Sorenson (2007)
- (C)VCs can thus act as both a ‘scout’ and a ‘coach’
Nature vs Nurture venturing
Nature: selecting the right ventures pre-investment
Nurture: developing and growing the venture post-investment
Is nature or nurture more important in predicting the success of a venture?
Bertoni, D’Adda & Grilli (2016)
- Europe (more sparsely populated VC-areas): best start-ups may skip VC funding altogether (so the other way around: VCs actually pick startups in need for help).
- More experienced VCs: outperform when it comes to both selecting and nurturing, where selecting has double the impact on IPO of the start up
Real Options Theory
An initial CVC Investment gives the option to acquire the company when It successfully develops
Misappropriation (Anton & Yao, 1994; Knoben & Bakker, 2018)
- A start-up having a valuable asset
- The start-up forming a tie with an incumbent to commercialize this asset
- The incumbent having the ability to utilize this asset without relying on the start-up
How to avoid misappropriation
- Intellectual Property Protection (IPP)
- Secrecy and Timing: do not disclose information until a later stage
- Social Defenses: bring along a third party chaperone.
