How Corporate Venture Capital Investing Increases Innovation

After the dot-com bubble burst about five years ago, corporate-sponsored venture capital funds jumped off that bandwagon in droves. Investing in startup technology companies — thought to be a quick way to beef up the corporate bottom line and look technologically hip while doing so — suddenly didn’t seem like such a smart idea.

Managements as diverse as those at Boeing and Dell junked the concept. The reasons varied, says Mark G. Heesen, president of the Arlington, Va.-based National Venture Capital Association (NVCA). At Boeing, the unit fell victim to a wider corporate restructuring. At Dell, managers just didn’t see enough of a positive impact on its bottom line. Such retrenchments caused hardly a blip on the corporate Richter scale. Unlike freestanding venture funds, some of which now manage billions of dollars in assets, corporate funds typically are small. "When a key person leaves, these funds often fall apart," Heesen says.

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