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Organizational Structure and Decision-Making in Corporate Venture Capital

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  • Strebulaev, Ilya A.

    (Stanford U)

  • Wang, Amanda

    (Stanford U)

Abstract

This paper studies corporate venture capital (CVC) units of large US corporations to learn how they make decisions across several areas: internal organization of CVC units, relationships with par- ent companies, CVC unit objectives, investment process and approval, deal structure, relationship with portfolio companies, compensation, and composition of CVC teams. The study is conducted by interviewing senior team members of seventy-four CVC units, representing 78% of the active CVC units of companies in the S&P 500 index. CVC units are organized in significantly more diverse ways than institutional VC firms. Unlike institutional VC firms, most CVC units do not manage committed venture funds, but instead invest from the balance sheets of their parent compa- nies. Investment committees, in which parent company executives play a pivotal role in approving individual decisions, are common. Many corporate venture capitalists (CVCs) believe executives at their parent companies do not understand the norms of the venture space. The demographic composition of senior team members at CVC units is very different than that of their counterparts at institutional VC firms. The results raise a number of issues about the economic role of CVC units in corporate innovation.

Suggested Citation

  • Strebulaev, Ilya A. & Wang, Amanda, 2021. "Organizational Structure and Decision-Making in Corporate Venture Capital," Research Papers 4008, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:4008
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    File URL: https://www.gsb.stanford.edu/faculty-research/working-papers/organizational-structure-decision-making-corporate-venture-capital
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    Cited by:

    1. Bian, Bo & Li, Yingxiang & Nigro, Casimiro A., 2022. "Conflicting fiduciary duties and fire sales of VC-backed start-ups," LawFin Working Paper Series 35, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).

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