Corporate Venture Capital: “Plan B” for Real Venture Capital or Compelling Career Combination?

The venture capital market is highly cyclical, which discourages some bankers from considering it.

Join in a bad market, and you might close 0 deals and learn very little – except how to start a podcast or Substack on becoming a VC influencer.

But there is one “lower Beta” alternative: Corporate venture capital (CVC).

These groups are attached to large companies (often in the tech industry) and invest in startups not solely for financial reasons.

Yes, they want to realize solid returns, but they’re also motivated by strategic considerations, such as future acquisitions or entering new markets more easily.

Because of corporate venture capital groups’ relationships with their parent companies, they might be active when traditional VCs are not.

Many people describe corporate venture capital as a combination of corporate development and traditional venture capital.

That’s a nice 1-sentence description, but it’s more accurate to view CVC groups on a spectrum:

Types of Corporate Venture Capital Groups: Independent Funds vs. Business Units

Corporate Venture Capital Definition: Like traditional venture capital firms, corporate venture capital teams invest in startups and growth companies, but in association with a larger parent company and often for both strategic and financial reasons; the CVC team may be independent or closely within the oversight of the parent company.

Before researching the industry, starting the recruitment process, or considering job offers at different firms, you need to think about which type of CVC group you want to be in.

CVC groups that are more independent from the parent company, such as Google Ventures (GV) and Salesforce Ventures, are closer to traditional VC firms and better for long-term venture capital careers.

Compensation also tends to be higher, and in some cases, they even offer carried interest.

We’ll refer to these groups as “independent funds.”

Groups that are more closely attached to the parent company are closer to roles such as corporate development and strategy, and they’re better if you want career options within a specific company.

We’ll refer to these as “business unit” groups.

It can be tricky to figure out which category a CVC group falls into, but here are a few questions you can use to assess it:

• Limited Partners (LPs) – The vast majority of corporate venture capital groups have only one Limited Partner: The parent company. However, if the group has multiple Limited Partners, it is definitely more of an independent fund. One example in the auto industry is Alliance Ventures (backed by Renault, Nissan, and Mitsubishi).
• Fund Structure – Does the team invest via a separate fund, or does it invest using the cash directly on the parent company’s Balance Sheet?
• Decision-Making – Does the group require an “internal business sponsor,” such as a high-level executive, for final investment decisions? Also, do investments need to be aligned with the company’s strategy? If so, the group is more of a business unit.
• Portfolio Company Exits – Does the parent company acquire many of the group’s portfolio companies? If so, it’s more likely to be a “business unit” team; if not, it’s more likely to be an “independent fund.”
• Board Seats – If the group frequently takes Board seats when investing in startups, it’s more likely to be an independent fund; business unit teams don’t necessarily care quite as much about this point.
• Deal Role – Does the group lead rounds or simply follow institutional VCs that have already committed to funding rounds? Independent funds are more likely to be leaders.

Some groups are in the middle of the spectrum, so it’s not quite as simple as picking one category or the other.

However, most of the top CVC groups (see below) are squarely in the “independent fund” category.

Corporate Venture Capital vs. Venture Capital vs. Corporate Development

To understand the spectrum of CVC groups, it helps to understand the “comparable groups.”

We have detailed articles on both venture capital and corporate development careers, so I’ll refer you to those for the main points.

Venture capital firms make minority-stake investments in startups through growth-stage firms, while corporate development focuses on acquisitions, partnerships, and joint ventures.

You’ll complete market research, deal sourcing, due diligence, and deal execution in both fields, but the relative importance of each one varies. For example:

• Deal Sourcing: It’s more important in venture capital because in corporate development at large companies, bankers and other contacts will bring you many deals.
• Due Diligence: It’s far more important in corporate development because early-stage startups tend to be simple, and many investment decisions are made based on the team and market rather than financial analysis.
• Market Research: This is generally more important in VC because your job is understanding entire markets and where companies fit in. In corporate development, you usually focus on a few select markets your firm is interested in.

Corporate venture capital, especially in the “business unit” teams, blends elements of both fields and puts a distinct spin on them.

A few examples include:

• Investing Terms: Some CVC groups include terms like the right of first refusal or right of first notice in investment agreements because they want to prevent competitors from acquiring the best startups. This attracts scrutiny and sometimes makes it harder to close deals.
• Themes and Market Research: When CVC teams do “market research,” they consider what will help their company to launch new products/services or enter new markets that are priorities for the executives. Institutional VCs take a more holistic view and care more about whether a market is promising in general.
• Financial Modeling and Valuation: When you analyze a potential investment in CVC, you might “look ahead” to potential synergies if your firm ends up acquiring the startup in the future. Yes, it’s very speculative, but it also never comes up in traditional VC.

Corporate venture capital is still distinct from corporate development because CVC professionals do not work on large M&A deals.

They might occasionally work on smaller “acqui-hires,” but not multi-billion-dollar deals that require serious due diligence and integration work.

The Top Corporate Venture Capital Groups

Most corporate venture capital groups do not disclose their assets under management (AUM), so it’s difficult to determine the “biggest” ones.

Two notable exceptions are Google Ventures (GV), with $10+ billion in AUM, and Intel Capital, with $5+ billion in AUM, so they are both on this list.

The full set includes the following groups:

There’s a heavy TMT focus because many startups are founded in the tech, media, and telecom sectors.

But there are CVC groups in other industries; examples in healthcare include Johnson & Johnson Innovation, Roche Venture Fund, and Pfizer Venture Investments.

In financials/insurance, there’s Munich Re Ventures, and in the consumer space, there are groups like Unilever Ventures, LVMH Luxury Ventures, and Kering Ventures.

The auto industry has groups such as Alliance Ventures, as noted above.

Who Gets Into Corporate Venture Capital? And How?

If you consider the top “independent funds,” the same types of people that get into traditional VC firms get in: Bankers, consultants, people with sales/product/finance experience at startups, and some from private equity and growth equity roles.

Direct hiring out of undergrad and MBA programs happens, but is quite rare because you need a certain amount of full-time experience to be useful in this role.

If it’s more of a “business unit” CVC group, you’ll see more people moving in internally from teams such as corporate strategy, corporate development, and corporate finance.

The recruitment process is similar to traditional VC: Mostly off-cycle, with interview questions about markets, interesting companies, and the group’s portfolio companies, along with some technical concepts and potentially a simple case study.

One difference is that if it’s a group with more overlap with the corporate development team, you’ll probably get more detailed technical questions about accounting, finance, and transaction modeling.

Corporate Venture Capital Careers & Day-to-Day Life

Daily life in corporate venture capital doesn’t seem that much different.

You’ll still spend time sourcing deals, executing investments, monitoring portfolio companies, and attending Board meetings.

Most of the differences emerge when you consider the “business unit” groups:

• Other Teams: You’ll often work with the strategy and corporate development teams to plan investments in terms of future partnerships or markets your firm wants to enter.
• Hierarchy: Many CVC teams are structured like corporate development teams, with the hierarchy going from Associate to Manager to Director to VP or “Group Head” at the top. Advancement tends to be slower than in traditional finance roles because turnover is low, few people want to leave, and there’s no “up or out” culture.
• Portfolio Companies: Instead of offering support with hiring, customers, and other traditional areas, you might actively partner with portfolio companies by taking their products to market or bundling them with yours.
• Fundraising: If the CVC team only has the parent company as its Limited Partner, you will get no exposure to fundraising or LP relations. Some people like this, while others want this exposure (e.g., if they want to start their own VC firm one day).

Salary, Hours, and Culture

And now we arrive at the biggest disadvantage of corporate venture capital: In many groups – even “independent” ones – there is no carried interest.

Therefore, you won’t receive any upside from investments that perform incredibly well (e.g., 100x+ returns), which is a massive negative at the senior levels.

There are some exceptions, but even at firms like Google Ventures that offer carried interest, it’s awarded and distributed differently than at institutional VC firms.

Outside of this issue, even the base salary and year-end bonus tend to be 15 – 20% lower.

So, if we use John Gannon’s annual VC salary survey as a guide, and the average VC Associate earns between $150K and $200K in total compensation, it might be closer to $120K – $160K in corporate VC.

The discount to standard VC compensation might be lower at some larger, independent funds.

In exchange for this, the hours and lifestyle are better: Expect maybe 50 – 60 hours per week with fewer outside meetings, calls, and other commitments.

Corporate Venture Capital Exit Opportunities

The traditional VC exit opportunities still exist: You could join a startup in a finance or operations role, move to another VC firm or group, go the MBA route, or potentially go back into banking or consulting if you worked there previously.

The difference is that CVC also boosts your chances of winning roles in areas like corporate strategy, corporate development, and corporate finance.

However, I don’t think the improved ability to win these roles is necessarily a huge benefit.

They’re already less competitive than IB/PE, so a higher success probability makes less of a difference.

You’re highly unlikely to move to a private equity mega-fund, and even moving to a top-tier traditional VC is tricky because brand name and reputation still matter a lot.

It’s plausible to move from GV or Intel Capital to one of these, but you’re probably not going to do it coming from “Random Fortune 500 CVC Group.”

And if you want to move into something like investment banking or private equity, you should probably join the corporate development team first, since the skill set is far more relevant.

Is Corporate Venture Capital Right for You?

In a previous article, I mentioned that venture capital is better at the end of your career rather than the start.

Corporate venture capital is almost the opposite: It’s not a great long-term plan because of the lack of carried interest in many groups, the slower advancement, and the lack of independence.

However, it can be quite useful for short-term career moves, such as using the experience to get into corporate development or move to a traditional VC firm after a few years.

You could argue that the work itself is more interesting in corporate venture capital because you’ll spend less time cold calling/emailing, you work with many different groups, and you think about deals based on more than just financial criteria.

That’s all good, but the compensation discount, not-so-great exit opportunities, and lack of a solid brand/reputation for many groups hurt quite a bit.

So, I would recommend corporate venture capital mostly if:

1. You are interested in the “corporate” route but still want to keep your options open for other VC firms or startups; or
2. It’s clearly superior to other offers you have won, such as at unknown/lower-tier VC firms or roles where you do not work on deals.

The best “combination” groups give you the benefits of separate fields while reducing their drawbacks.

Unfortunately, corporate development is a bit of the opposite: You get many disadvantages of both corporate development and venture capital without enough benefits to offset them fully.