Complementary Value-Adding Roles of Corporate Venture Capital and Independent Venture Capital Investors

In the last five years, corporate venture capitalists have become an increasingly important source of finance for technology based new firms. Earlier research suggests that both independent venture capitalists and corporate venture capitalists often provide valuable valueadded benefits for their portfolio companies. However, there is little research which actually compares and contrasts the value-adding capabilities of independent venture capital and corporate venture capital investors. In this paper, we focus on the differences in the value-added benefits provided by the two types of investors to their portfolio firms. The analysis is based on a survey of CEOs of U.S. technology based new firms which have been financed by both corporate venture capital investors and independent venture capital investors. Independent venture capitalists have superior skills and experience at helping the entrepreneurial founders of high tech firms transform their nascent enterprises into viable companies. Their key contributions include helping young firms to develop their strategies, obtain additional financing, and recruit key executives. On the other hand, corporate venture capitalists appear to have a relatively stronger and more valuable role in increasing the public credibility of the young firms, helping them attract important customers, suppliers and partners, and in supporting their technological development. Both skill sets are relatively unique to each type of investor. Critically, they are complementary and a young firm can benefit from attracting both types of resources.