Successful CEOs have come to understand that maintaining the current position is no longer sufficient. Innovation and new business creation enable them to align their organizations with technological trends, shifting markets, and evolving customer needs. This requires the vision to identify opportunities beyond the company’s core and the courage to explore new frontiers.
Why New Business Building Matters: Higher Returns, Bold Moves
An analysis of over 1,100 executives in McKinsey’s global survey reveals that companies allocating at least 20% of their growth investment to new business creation achieve higher revenue growth. For large enterprises generating over $1 billion in annual revenue, this approach can result in up to 2.5% higher annual growth; equivalent to a 50% increase above the global average.[1]
To survive against disruptive startups, traditional corporations must embrace open innovation.
According to a joint survey by ADL and Match-Maker Ventures, 72% of respondents identified “access to innovation” as the primary reason for engaging with startups.[2]
Corporate Venture Capital (CVC), corporate accelerators, venture building, and the venture client model have emerged as essential tools for creating competitive advantage. By combining the assets and scale of established corporations with the agility and creativity of startups, these models pave the way for sustainable value creation.[3],[4]
CVCs create shared value and mutual benefits by combining corporate assets such as:
- Market access
- Customer and supplier networks
- Brand reputation
- Brand reputation
- Financial resources
with startup attributes like:
- Entrepreneurial mindset
- Speed and agility
- Innovation-first culture
- Lean and adaptive structures
This synergy not only generates financial returns but also:
- The ability to pilot new business models
- Access to emerging technologies
- A pathway to embedding entrepreneurial thinking within the organization.[5]
The number of corporations actively investing in startups has more than tripled over the past decade. In 2024 alone, 2,344 corporate investors participated in startup funding rounds worldwide. [6]
CVC Market Trends: Rapid Growth and Focus on Early-Stage Deals
In 2024, total global investment in startups reached approximately $314 billion, marking a 3% increase compared to 2023. Corporate venture capital (CVC) played a significant role in this ecosystem, accounting for between 16% and 25% of all startup funding rounds. [7][8]
- 77% of Fortune 100 companies invest in venture capital, and 52% of them operate a dedicated CVC unit.
- According to CB Insights, over the past four to five years, more than 60% of CVC deals have occurred at the early-stage, reflecting a strong focus on identifying transformative technologies at an early phase.
- CVCs are increasingly concentrating their investments in high-growth sectors such as artificial intelligence, fintech, digital health, and cybersecurity. [9]
This year, CVC investors have clearly shifted their priorities.
According to the GCV survey, for the first time, 40% of respondents identified “enhancing innovation within existing business lines” as their top priority — representing Horizon 1 goals for 2025.
In contrast, the 2024 survey showed a stronger focus on long-term, future-oriented innovations (Horizon 3). This shift indicates that, amid current market conditions, CVCs are increasingly seeking to strengthen their parent companies’ core business operations rather than investing primarily in entirely new technologies or business models. [10]
Types of CVC Models Based on Their Mandate
1. Strategic CVCs
- The primary focus is on strategic objectives that align with the parent company’s long-term vision. Contrary to common belief, these CVCs do not sacrifice financial returns for strategic gains. Instead, they aim to create both strategic value and strong financial performance. This balance is often reflected in their compensation structures, where rewards are tied to both strategic KPIs and financial outcomes.
- Examples: T Capital, Singtel Innov8 Ventures, Titanium Ventures
The table Figure 4 highlights three core objectives typically pursued by strategic CVCs.
Successful strategic CVCs can achieve internal rates of return (IRR) exceeding 15%, which translates to roughly a 2x multiple on invested capital at the median performance level. Moreover, when properly structured, such investments can generate strategic value equivalent to the entire fund’s financial return — for example, through knowledge-sharing collaborations and the co-development of joint intellectual property (Joint IP) that create long-term value for the parent company.
Financial
- Unlike strategic CVCs, financial CVC investors operate without a defined strategic mission. Their primary focus is solely on maximizing financial returns and achieving strong portfolio performance, similar to traditional venture capital funds.
- Examples: GV (Google Ventures)، CapitalG
3. Hybrid
- These CVCs operate similarly to financial investors but also pursue a limited strategic mandate to create value for the parent company. They seek a balance between financial performance and selective strategic alignment.
- Example: Comcast Ventures (currently transitioning toward a more strategic model).[11]
CVC as a Future-Oriented Strategy
As illustrated in Figure 6, the establishment of Corporate Venture Capital (CVC) units among the world’s leading corporations dates back more than 50 years. On average,
major global enterprises have been operating CVCs for over a decade, integrating them into their long-term investment and innovation strategies.
Evidence from international models and research clearly indicates an accelerating shift toward CVCs as essential instruments for building innovation ecosystems around industrial groups and holding companies. In other words, CVCs can create a parallel universe of business growth; one that not only drives innovation but also ensures the sustainability and longevity of the parent organization.
However, the key question remains: which CVC model best fits each organization?
Global experience suggests that in the early stages of CVC development, companies tend to establish strategic CVCs — primarily focused on expanding and strengthening the parent company’s value chain. By the second or third year, many shift toward a hybrid model, balancing strategic alignment with financial performance.
As the investment portfolio matures, by around the seventh year and beyond, the emphasis often transitions further toward financial returns.
That said, this evolution varies significantly across industries, depending on factors such as innovation maturity, capital intensity, and market dynamics. Figure 7 illustrates the main areas of focus among different CVC models in 2024. [12]
Key Considerations for Launching a Successful CVC
Research involving more than 120 Chief Innovation Officers (CINOs) and similar executives across the United States, Asia, and Europe reveals that around three-quarters of corporate innovation programs fail to deliver the desired outcomes. Unsuccessful initiatives can undermine a company’s ability to compete with more agile and dynamic rivals.
Three strategic actions have proven effective in addressing over 80% of the major challenges that typically lead to failure:
- Enhancing the value and impact of venture programs for other business units
- Expanding the scope beyond traditional commercial startups
- Resolving conflicts of interest between corporate investment units and startups.[13]
Among the three CVC models discussed, establishing a strategic CVC is often the most complex and demanding. Its success depends on addressing several critical elements:
-
Clearly Mission Definition
The CVC’s objectives must be explicitly defined — whether the focus is on bridging capability gaps, ecosystem development, acting as the organization’s eyes and ears, or a combination of these goals.
-
Translating Mission into KPIs:
Companies should establish both strategic and financial key performance indicators (KPIs) based on the defined mission, linking them directly to incentive and reward systems. Strategic KPIs will vary depending on the nature of the investments.
-
Selecting the Right Legal Structure
A CVC can be set up as a corporate subsidiary or a limited partnership. The choice largely depends on the CVC’s mission, as well as factors such as desired autonomy and the ability to attract top talent.
-
Establish a clear exit strategy
A well-defined exit plan is essential for both the CVC and its portfolio startups — whether through IPO, mergers and acquisitions (M&A), or divestment. Having a clear exit strategy helps maximize value creation and supports long-term strategic planning for both parties. [14]
The Time to Act Is Now
Two-thirds of CEOs expect to build a new business within the next year. As opportunities rapidly emerge and competition intensifies, only companies that have strengthened their business-building infrastructure and capabilities will be positioned to capture long-term advantages. [15]Research shows that more than 85% of companies possess at least one underutilized asset — whether it be data, technology, intellectual property, or internally developed products. These untapped assets represent powerful foundations for new business creation, particularly in industries such as finance, healthcare, technology, and consumer goods. [16]
Hot Domains for Business Creation: From AI to Sustainability
Business leaders are increasingly focusing on areas with the greatest potential for long-term value creation — and for most, artificial intelligence stands out as a key opportunity. (See Figure 8)
Within this landscape, Generative AI (GenAI) has experienced remarkable growth — with 60% of companies planning to build new businesses in this domain.[17]
Although the recent expansion of CVCs in Iran appears closely tied to the Knowledge-Based Economy Acceleration Act, many large holding groups and industrial conglomerates have in fact been leveraging CVC-like strategies over the past decade — even if not under the formal CVC label.
Undoubtedly, the path toward sustainable growth and resilience in today’s volatile economy runs through the development of CVCs. CVC is not just an investment tool — it’s a forward-looking strategy.
Accordingly, five guiding principles can support organizations on this journey:
- CVCs is more than investment — it is a forward-looking strategy.
- Success requires a clear, measurable operating model.
- Focus on a few strategic domains that are aligned with the company’s overall direction.
- Understand and manage risks, such as conflicts of interest or potential brand impact from startup failure.
- Understand and manage risks, such as conflicts of interest or potential brand impact from startup failure.[18]
Ultimately, while most CVC exits occur within the parent organization’s ecosystem, even a business failure can leave behind valuable organizational learning — strengthening the parent company’s long-term innovation capability.
