Identifying a Sound Strategy Can Contribute to a Corporate Venture Fund’s Success, IDC Says

FRAMINGHAM, MASS – DECEMBER 11, 2000 – The recent turbulence on Wall Street has created an environment in which companies need to justify the existence of corporate venture funds. According to the market intelligence and advisory firm IDC, in addition to financial gain, there are sound strategic reasons for operating these funds.

 

IDC has identified five such reasons. Venture funds can be used to:

· Create goodwill between the parent firm and a start-up company

· Leverage an investment into a complementary partnership between the start-up and parent firm

· Build businesses that depend on the parent's firm technology and/or skill sets

· Convert revenue from being based on time spent to being based on value created during an engagement

· Increase employee retention

Corporate venturing activities aimed at building wealth as their primary goal face a difficult future, said Ned May, a senior analyst in IDC's Worldwide Services research program. However, designing a fund around these strategies ensures a corporate venture fund's contribution and success.

According to IDC, the first step in designing a corporate venture fund should be deciding what strategy to pursue. To determine the appropriate strategy, firms need to ask themselves three critical questions: When does the firm want to reap the benefit from the fund? How much money will be allocated to the fund? What unique operation structures are in place to assist the operation of the fund? May said. The answers to these questions will dictate what strategy should be pursued.

Once the strategy has been determined, firms must design the operation of the fund so that it is aligned with the interests of the parent firm.

Funds that look for synergistic relationships with start-ups will benefit financially from sound investments, May said. Focusing on the unique capabilities your firm can offer in the operation of these funds will help you design a fund that endures.

Information like the above can be found in IDC's recent report Designing Your Corporate Venture Fund to Last (IDC #B23359). This report outlines the critical questions corporations must answer when they are designing a venture fund. The report demonstrates how corporations can align the strategies, structures, and compensation schemes of their venture funds to meet their corporate goals.

To purchase this report, contact Jim Nagle at 1-800-343-4952, extension 4549, or at jnagle@idc.com.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies and the financial community. Additional information can be found at www.idc.com.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

# # #

All product and company names may be trademarks or registered trademarks of their respective holders.