Communications Strategies for Corporate Venture Capital firms
Silicon Valley’s Sand Hill Road: The home of Venture Capital
I recently wrote a LinkedIn follow-up piece to an article in the Financial Times about the challenges that startups are currently facing when seeking funding.
As The FT highlighted, the reason for the challenges is that venture capital (VC) companies are keeping their capital dry because of the current global fiscal climate, meaning that they are not making as many investments as they used to. This is impacting many start-ups across a range of sectors that are looking to scale.
Of course, while VCs are not the only source of capital, they own the landscape. From a perception point of view, VCs have funded the big players in the technology sector, many of whom have come out of California’s Silicon Valley. As a result, they are seen as the go-to investors, even though corporate ventures, private equity, and, in some jurisdictions, public sector finance are also available if there is a geopolitical reason.
Yet, it is companies like Sequoia Capital, Kleiner Perkins, and Andreessen Horowitz that captured their headlines and created an investment ecosystem with their bets on companies like Apple, Google, PayPal, Meta, Uber and Airbnb, as well as other VCs that contributed to the innovation that we take for granted every day.
Venture capital companies benefited from not just innovative investment models and soaring valuations of companies they invested in but also communications and how the media portrays VCs. This puts many at the front of the queue for start-ups seeking support.
But what now for start-ups and businesses looking to scale? Well, there is capital elsewhere—not just capital but sector expertise that companies can leverage to support their scaling.
Corporate venture capital firms exist in many different markets around the world. The CVC ecosystem has been growing, challenging VCs in investment rounds.
Insight from Bain suggests that VC firms globally held over $700 billion for investment in 2023, while CVCs managed around $100 billion for investments in startups in 2023 according to Global Corporate Venturing. Yes, while VC firms might hold a larger pot of money, CVC activity continues to rise. In 2023, despite an overall decline in VC funding, CVC deals remained steady, and the number of CVC investors even increased.
But what do CVCs need to do if they are to compete for opportunities?
They need to invest in an effective and focused communication strategy. They need to tell their story and focus on the value that they add and the support that they can give. They need to use data in a human way to be noticed.
Three specific things they need to focus on:
Reputation Development and Management
CVCs need to invest in telling their stories publicly and privately and focus on brand alignment, building trust, and differentiation.
Corporate ventures are extensions of their parent companies and, therefore, must align their communication strategies to reflect the parent company’s brand and values. Effective communication will help ensure investments are seen as strategic and synergistic with the broader corporate goals. They need to leverage the positive values that their parent company can support.
An issue that is even more important for CVCs is the reputation of not just themselves but that of their parent company. A strong, positive reputation can significantly enhance deal flow and provide access to top-tier investment opportunities.
One value-add that a CVC can leverage is industry expertise or access to global markets, which can help distinguish a CVC from traditional venture firms.
Stakeholder Engagement
Stakeholder engagement is critical to any organisation. This is true not just externally with partners, suppliers, or regulators but also internally with parent company executives, startup partners, and other investors, all of whom require clear and ongoing communication. This transparency helps manage expectations and fosters strong relationships.
CVCs are improving their engagement with one another, especially through the Global Corporate Venturing community, which helps with best practices, dialogue, and insight sharing. Stakeholder engagement helps raise awareness of themselves and this community of investors.
Strategic Communications for Risk Management and Mitigation
Communicating effectively during a crisis (e.g., an underperforming venture or market downturn) can mitigate negative impacts. A proactive communication strategy helps manage the narrative and maintain stakeholder trust.
Additionally, CVCs operate in multiple regulatory environments and must ensure compliance through accurate and timely reporting. Effective communication can prevent misunderstandings and potential legal issues.
Because CVCs are an arm-length entity from a corporate and often listed parent company, they must engage in regular and detailed updates to investors about the performance of the investment portfolio, including potential risks and the strategies in place to mitigate those risks, are critical. This not only builds investor confidence but also supports long-term financial commitments from them.
These three suggestions are top-line and a place to start. Strategic communications need a vision and a desired outcome that helps drive the business forward, and CVCs need to start thinking if they are to support themselves and their parent companies to add growth.
In summary, the time is now when corporate venture capital companies must look at the sectors and the start-ups that are looking for capital and expertise and invest in effective communications that complement their investment strategies.
Effective communications can derail and add value.
