of Venture Client & Corporate Venturing Terminology
Active startup sourcing is a proactive approach taken by venture client unit teams to search for startups that have solutions to specific problems or are working within specific problem areas. This involves actively seeking out startups that can provide solutions that meet their needs, rather than waiting to be contacted by startups.
For example, a venture client unit team may actively search for a startup that has developed a technology to charge car batteries 10 times faster than existing solutions. This approach has several advantages. First, it can generate a higher quality of startups that meet the specific needs of the venture client unit. Second, it can save significant time and resources by avoiding the need to sift through irrelevant startup solutions.
However, it’s important to note that active startup sourcing requires a strategic and well-planned approach. The venture client unit team needs to identify the specific problems they are trying to solve and the key areas where startups are likely to have innovative solutions. They also need to establish clear criteria for evaluating the startups they come across, such as their technology readiness level, team experience, and market potential.
In summary, active startup sourcing is a valuable approach for venture client unit teams to identify and evaluate startups that can provide innovative solutions to specific problems. With a strategic and well-planned approach, this method can save time and resources while also increasing the chances of finding the right startup for their needs.
The adoption of startup solutions refers to the process by which a Venture Client company integrates a startup’s technology into its operations on a long-term basis. This involves making decisions and allocating resources to ensure that the technology is successfully implemented and generates a strategic benefit, such as increased revenue or profitability through cost savings.
Adoption is the final and critical stage of the Venture Client process and typically follows a successful pilot project that has demonstrated the effectiveness of the startup’s technology. For example, when Apple adopted the technology of the startup Primesense for its iPhone product line, it enabled the creation of the Face ID feature. This highly differentiated feature helped Apple to gain a competitive edge in the market and build customer loyalty. (Check out this Apple Insider article read about the adoption of Primesense technology by Apple.)
In summary, the adoption of startup solutions is a crucial step in realizing the potential benefits of a startup’s technology, and requires careful planning, allocation of resources, and strategic decision-making by Venture Client companies.
The Adoption Quota is the percentage of startup pilot projects that achieve a defined adoption milestone within a specific timeframe. This milestone is typically determined by the success or failure of the pilot project that precedes the adoption phase. A typical timeframe for measuring the Adoption Quota is one calendar year.
For example, in 2020, Venture Client Company X conducted 50 pilot projects, out of which 25 achieved the adoption milestone defined as meeting at least 80% of the pilot project KPIs. As a result, X achieved an Adoption Quota of 50% in 2020.
The Adoption Quota is strongly dependent on the quality of the Venture Client Model, which includes the Venture Client process, resource allocation, and decision-making systems. Data from 27pilots of Venture Client companies from across 9 industries suggests that proficient Venture Client companies can achieve an Adoption Quota of over 60% per year.
In summary, the Adoption Quota is a measure of the success of Venture Client companies in adopting startup technologies on a long-term basis. Achieving a high Adoption Quota requires a well-designed Venture Client Model.
Adoption resistance is a term used to describe the reluctance of venture clients within a company to embrace solutions offered by startups. Venture clients are employees who are responsible for solving particular problems. This resistance can be influenced by several factors such as the venture client’s personality, their level of knowledge about startup solutions, and their perception of the benefits of these solutions.
The degree of adoption resistance can also be affected by the strategic and hierarchical position of the venture client unit, the quality of its tools and team, and the scope of services it provides to the organization. To address this resistance, the venture client team can offer special awareness and instructional services that aim to change the culture and mindset of the organization towards startups. By doing so, they can reduce the adoption resistance and increase the chances of successful implementation of startup solutions.
In summary, the adoption resistance is a significant challenge that startup solutions face in many organizations. However, with the right approach and support from the venture client team, this challenge can be overcome, leading to the successful adoption of these innovative solutions.
An adoption strategy is a critical plan or approach that a Venture Client company uses to integrate a startup’s solution effectively across the entire organization after successful validation during the pilot phase. The Venture Client model outlines two primary adoption strategies – purchasing the startup’s solution, where the startup becomes a long-term supplier, or acquiring a controlling equity stake in the startup, where the startup is merged into the company.
For instance, Apple’s adoption strategy of Primesense technology involved acquiring the startup to use and benefit from their solution as a component in the iPhone and other products exclusively.
Overall, an adoption strategy is a crucial aspect of successfully transforming a startup’s technology into a measurable benefit for the Venture Client company. It requires a well-planned and executed approach to integrating the startup’s solution into the organization effectively. A successful adoption strategy can lead to significant benefits, such as improved efficiency, increased productivity, and enhanced competitiveness in the market.
Assessment is a critical process that involves evaluating a startup company, including its technology, team, financial situation, and most importantly, the potential benefits and impact of its solution on the venture client company. To achieve a high-quality assessment, the venture client unit team must have access to up-to-date and accurate data about the startup ecosystem and individual startups. They also need technology to support the analysis of large datasets and identify startups that meet their specific needs.
Assessment is a crucial part of the overall startup adoption process. It helps the venture client unit team to identify the most promising startups and determine which ones are best suited to solve complex strategic problems. By carefully evaluating the startups, the team can make informed decisions about which startup technology to adopt via a partnership or M&A that will generate substantial competitive advantage, measured in millions of cost savings and new revenues.
To conduct a thorough assessment, the venture client unit team needs to establish clear criteria for evaluating startups. These criteria should include factors such as the startup’s technology readiness level, team experience, market potential, financial situation, and the potential for generating substantial competitive advantage. By carefully evaluating these factors, the team can identify startups that have the potential to provide significant value to the venture client company.
In summary, assessment is a critical part of the startup adoption process that helps the venture client unit team to identify and evaluate high-impact startup technology. With access to up-to-date data and the right technology, the team can conduct a thorough evaluation and make informed decisions about which startups to partner with or acquire. The outcome of a successful assessment improves the adoption speed and probability of startup technology that generates millions of dollars in cost savings and new revenues for the venture client company.
The BMW Startup Garage, established in 2015 by Gregor Gimmy, a former BMW innovation manager and founder of 27pilots, is widely recognized as the world’s first official Venture Client unit. The unit aimed to enable BMW to leverage the strategic benefits of startups and the startup ecosystem across its entire value chain, from research and development to manufacturing, logistics, information technology, marketing, sales, and human resources.
Thanks to the support of the BMW Startup Garage, BMW has been able to adopt innovative startup solutions more quickly, with lower risk and cost than traditional R&D efforts or corporate venturing models. The unit’s extensive network of startups and venture capitalists in the global startup ecosystem has enabled BMW to identify and validate unique new technologies, resulting in a higher number of successful adoptions that effectively address complex business challenges.
Today, the BMW Startup Garage remains a critical driver of innovation and competitive advantage at BMW, helping the company stay ahead of the curve. By actively engaging with startups and the broader startup ecosystem, the unit has identified new growth opportunities, generated significant cost savings, and enhanced the overall performance of the company across all areas of its business.
Corporate Private Equity refers to a specialized unit within a corporation that invests in startups by acquiring a controlling interest. The objective of Corporate Private Equity is to achieve strategic business objectives exclusively. These units are part of a larger corporate entity and have access to additional resources and expertise that can be leveraged to support portfolio companies.
To secure strategic benefits, Corporate Private Equity units take an active role in managing the portfolio company, leveraging the resources and expertise of the larger corporate entity. They may provide support in areas such as finance, marketing, operations, and technology, to name a few.
Corporate Private Equity is different from Corporate Venture Capital (CVC) in that CVC takes a non-controlling stake and is not involved in the management of the startup.
It’s worth noting that Corporate Private Equity can sometimes lead to a full acquisition of the startup, but this is not always the case. The primary objective of Corporate Private Equity is to achieve strategic business objectives exclusively, and this can often be accomplished without a full acquisition.
In summary, CVC and Corporate Private Equity differ in their level of involvement in managing and controlling the startup. CVC takes a non-controlling stake, while Corporate Private Equity involves acquiring a controlling interest. Additionally, Corporate Private Equity can sometimes lead to a full acquisition, but this is not always the primary objective.
Corporate Venture Capital (CVC) is a specialized organizational unit within a corporation that invests in early-stage or growth-stage startups through non-controlling equity stakes. Unlike traditional venture capital firms, which primarily focus on financial returns, CVCs are driven by the parent corporation’s strategic objectives to obtain strategic benefits from the startups they invest in. These benefits can be in the form of innovative technologies, products, or business models that can provide solutions to complex R&D or business process challenges.
However, CVCs face some limitations. They do not have the authority to purchase, use, or transfer the solutions of the invested startups, which can make it difficult and time-consuming to realize the strategic benefits. Moreover, conflicts of interest can arise between the financial interests of the startup and the strategic interests of the parent corporation.
To overcome these limitations, some corporations use Venture Client units instead of or in addition to CVCs. Venture Client units directly purchase and use the solutions provided by startups, eliminating the need for complex decision-making processes and allowing for faster implementation of innovative solutions.
It is also important to note that CVCs only have one Limited Partner (LP), which is the parent corporation. In contrast, traditional venture capital firms have multiple LPs. Additionally, if a corporation invests in a controlling stake of a startup, it would not be considered CVC, but rather the investment would fall under the purview of the corporate development or M&A department.
A unit that invests in non-controlling equity stakes of startups with the sole objective of generating positive financial returns on the investment. The financial CVC aims to earn a return on the investment in the form of capital gains, dividends or other financial metrics, without pursuing strategic benefits from the startup. Financial CVC has a direct impact on the balance sheet of the corporation by increasing or decreasing the value of its assets.
A dedicated unit within a corporation that invests in non-controlling equity stakes of startups with the goal of achieving strategic benefits beyond just financial gains. These strategic benefits can include learning about the solution, enabling a new product, process or business, and business model, which can have a direct or indirect impact on the profit and loss (P&L) of the corporation. Unlike general CVCs, strategic CVCs focus on leveraging the solution of the startup for strategic benefits, rather than just the value of its equity.
An early-stage startup is a stage in the development of a startup company that is characterized by having at least one working prototype of its solution. Even if the solution is already being sold, the startup can still be classified as early stage if either a) the market is different from the one of the Venture Client, or b) the product is not yet sold to the mainstream market. Generally, early-stage startups have already raised series A and B venture capital.
Startups without a prototype are considered seed-stage startups. In contrast to early-stage, these startups are generally still bootstrapped or have raised pre-seed or seed investments from professional investors such as angels and also venture capitalists.
Early-stage startups are typically characterized by a high level of risk and uncertainty, as they are still in the process of developing their product and building a customer base. As a result, early-stage startups often require significant amounts of capital to fund their development and growth.
Venture Client companies can profit from early-stage startups in that they get to learn earlier about an upcoming technology. It also allows them to provide feedback to the startup that the startup can implement, practically adapting the product to the specific needs of the Venture Client.
EBR – Economic Business Relationship: EBR refers to any kind of economic relationship between a startup and a company, which involves the transfer of money. Examples of EBRs include, but are not limited to:
- Purchasing the startup’s solution for a pilot project
- Rolling out the startup’s solution
- Licensing the startup’s solution
- Co-developing the startup’s solution
- Entering into a strategic alliance with the startup
- Acquiring the startup
- Investing in the startup
For instance, the VCL conducts a pilot project and decides to continue the EBR with the startup by rolling out its solution if the pilot is successful.
A one-page summary report that presents the Venture Client unit’s assessment of a startup’s leading solution after the leading assessment phase. It includes an overview of the startup’s solution, business model, and potential fit with the Venture Client’s strategic objectives. The report is created by the Venture Client unit team and serves as a basis for further evaluation and decision-making.
A Leading Startup Solution or Leading Solution refers to the assessment status of a startup in the Venture Client process. A startup is considered leading when the Venture Client unit determines that its solution has the potential to outperform solutions offered by other companies or even the Venture Client itself. To achieve the leading status, the startup must pass all the evaluation steps of the Leading Assessment activities and all previous assessment stages. The leading status is always specific to a particular use-case of the Venture Client and a specific Venture Client company. It is not a general statement that applies to all potential use-cases and Venture Clients. Therefore, a startup can be considered leading for use-case A but not for use-case B.
Passive Sourcing refers to the activities within the Startup Adoption process of a Venture Client aimed at attracting startups to initiate contact or request a partnership. These activities include promoting the Venture Client unit, publishing focus areas, conducting startup discovery events, social media marketing, PR, participating in events and conferences, and conducting SEO. The Venture Client creates a specific communication channel to support passive sourcing, enabling startups to proactively contact the Venture Client to express their interest in partnering.
See BSH Startup Kitchen profile on Linkedin: https://www.linkedin.com/showcase/bsh-startup-kitchen/
See partnership request form from the BSH Startup Kitchen: https://www.bshstartupkitchen.com/partner/
A Purchase Order is a legally binding document issued by a company to a supplier, confirming the details of a purchase agreement including the products or services being purchased, price, payment terms, delivery date, and other important terms and conditions.
Same as Request for Proposal (RFP)
A Request for Startups (RFS) is a formal process initiated by the Venture Client to search for startups that provide solutions for a specific problem or challenge. The RFS includes the announcement of the challenge and the criteria for the selection of the startups. Its goal is to identify and select relevant startups to solve the specific problem or challenge of the Venture Client.
An RFS Briefing document refers to the document sent by the Venture Client unit to the internal stakeholders to inform them about the Request for Startups (RFS) process. The RFS Briefing typically includes the challenge description, selection criteria, and a timeline for the RFS process. It aims to align internal stakeholders on the RFS process and ensure a smooth collaboration between the Venture Client unit and the rest of the organization.
Startups are a unique type of company, which makes them challenging to identify. The term “startup” primarily refers to a temporary stage in a company’s development. At some point, a company outgrows its startup phase. There are five key characteristics that distinguish a startup from a typical business:
1) A startup is a legally registered entity, meaning that it is a company in the eyes of the law. It’s not enough for a group of individuals to have a great idea; they must establish a company to move forward.
2) The founders of a startup are individuals, not companies. This is a critical characteristic because startups often encounter extreme situations of conflict. These near-death experiences unleash the creativity required to generate breakthrough innovations, which is vital to a startup’s success.
3) The founders of a startup must maintain control over the company. If investors or managers from incumbent corporations have control, the startup will be unable to make unconventional, high-risk decisions that are necessary for success.
4) The startup’s solution must solve a significant problem for its users. The relevance of the problem is measured by the potential billion-dollar market size. For Venture Client companies, market size equates to problem value. This means that a startup must solve a problem that has a substantial impact on revenue or savings.
5) The startup must own protectable intellectual property (IP) that enables it to bring a scalable product to market. This IP is critical to the startup’s long-term success, as it protects itself against incumbents, and is hence a key factor in attracting investors. In summary, startups are unique entities that require specific characteristics to succeed. These five key attributes help to distinguish startups from typical businesses and provide a roadmap for success in the startup world.
A Startup Solution Adoption Project (SAP) refers to a project undertaken by a Venture Client company to adopt and integrate a startup solution into their business. The SAP is a structured and planned process that involves a dedicated team, a defined mix of services, a budget, and a timeline to successfully execute the adoption of the startup solution. The scope of the SAP is determined by the specific Startup Solution Adoption Case being addressed by the Venture Client company.
Startup Solution Adoption Cases (SAC) refer to specific cases or situations where a Venture Client unit considers starting a Startup Solution Adoption project. These cases define the reasons for starting the project and how it should be executed, including the service mix, resource allocation, and prioritization. Each SAC has a recommended service mix, which is executed with varying amounts of resources and prioritized based on the urgency of the case.
There are three types of SACs:
- Explore: The company is either unaware of the problem or does not recognize its relevance.
- Scout: The company is aware of the problem but does not have a solution or is unsatisfied with the current solution.
- Watchout: The company has a solution for the problem, but is open to new solutions that may emerge and could suffer a competitive impact if they miss out on them.
A Venture Client company is a company that purchases and pilots solutions from startups to address their own business challenges. The company can have one or more Venture Clients within its various departments or business units. It is not mandatory for the company to have a dedicated Venture Client unit to be considered a Venture Client company.
For example, 27pilots is a Venture Client company as they purchase and use several solutions from startups to improve their business processes. One such solution could be the project management tool, Asana, which is used by the marketing department to streamline their workflow.
Venture Client Services refer to the set of structured activities provided by a Venture Client unit to the Venture Clients of a Venture Client company. These services are designed to facilitate the adoption of innovative solutions from startups. Examples of Venture Client Services include the sourcing and assessment of startups, organization of branding events to discover relevant startups, and facilitating the pilot project process.
For instance, the Venture Client unit at BMW may offer Venture Client Services such as scouting and assessing promising startups, connecting them with the relevant department within BMW, and providing ongoing support throughout the pilot phase.
A Venture Client Service Provider is a company that specializes in providing services related to the Venture Client model to Venture Client companies or their Venture Client units. These services can include startup sourcing and assessment, pilot project management, and organizational support. For example, 27pilots is a Venture Client services provider that assists companies in creating and operating Venture Client units, and also provides strategic and operational support to those units.
A Venture Client System refers to a category of software applications used by Venture Client units and external Venture Client services providers to conduct their activities. These applications may include tools for sourcing and assessing startups, managing pilot projects, and tracking key performance indicators.
For example, the 27pilots VCLS and the 27pilots VCLAS are both components of the Venture Client System used by 27pilots, a Venture Client services provider.
A Venture Client Unit Size refers to the scale of operations of a Venture Client unit. It is determined by the number of startup solution transfers per year, which is the primary metric for measuring the size of the unit. The size of a Venture Client unit depends on the objectives and key results pursued by the Venture Client, as well as the size of the Venture Client company. The unit size is used to determine the resources required to operate the unit, such as full-time employees, external services, and promotion. For example: 27pilots has defined Venture Client unit sizes as xSmall (5 transfers per year), Small (10 transfers per year), Medium (30 transfers per year), Large (50 transfers per year), and xLarge (100 transfers per year).