The CVB model and the return on investment for the corporation

There is an area of the Corporate Venture Building (CVB) model that is not talked about enough: the return on investment (ROI) for the corporation. Understanding this aspect is crucial for continuing to drive and evangelize this corporate innovation model. Some reasons why there tends to be little clarity are:

• Lack of transparency regarding the success ratio of the ventures.

• Difficulty in measuring returns that are not just financial.

• Variability in valuations based on sector, business model, and market.

• Differences in investment depending on whether it is an internal VB or with an external partner.

• Distribution of equity assigned to the entrepreneur.

Analyzing the numbers: valuations, costs, and success ratio in a Venture Building Track

To clearly break down the numbers, we consider a Venture Building Track (VBT), defined from the initial approach of a challenge or broad opportunity area (e.g., how to enter the carbon credit industry) until achieving a Problem/Solution fit, equivalent to a seed round in the market.

A seed-stage startup is typically valued between €1M-€1.5M, depending on factors such as sector, market, and entrepreneurial team. With the backing of a corporation and a partner like Byld, this valuation can be higher. For this example, let’s assume an average valuation of €1.25M.

• Cost of the process: By collaborating with Byld, the risk is shared between both parties (corporate and Byld), generally between 30%-70%. In our practical case, both parties take on 50% of the risk and benefit. The initial joint investment for the ex-ante work is valued at around €400K.

• This means that, after 5-8 months of joint work, the initial value multiplies by approximately three.

Now let’s consider the success ratio. We know that when creating ventures through a VB model, the ratio is significantly higher (at Byld we achieve around a 66% success rate due to our experience in identifying talent and opportunities, as well as the competitive leverage provided by the corporation).

With this data, for an investment of approximately €600K from each partner, three potential ventures are generated. With only one successful venture, the initial investment is practically recouped; with two ventures, it clearly doubles, and with all three, the ROI becomes exceptional. Furthermore, in more advanced rounds like Series A, valuations can triple again.

Intangible benefits of the VBT: branding, talent, and strategic knowledge

Beyond the financial return, the VBT offers additional advantages for the corporation:

• Creation of startups aligned with specific strategic needs of the corporation.

• Protection and strategic growth thanks to "tailor-made" solutions.

• Favorable conditions in case of not wanting to fully integrate the startup, allowing for a profitable early exit.

• Strengthening of the corporate image and generation of positive visibility in the market.

• Attraction of specialized talent and transfer of strategic knowledge to the corporation.

• Easier integration of the startup as a new business unit at an affordable cost.

• Greater ease of exit, leveraging networks of contacts and market knowledge provided by strategic partners like Byld.

Conclusion

The Venture Building Track represents an essential tool for corporate innovation. It allows for the efficient generation of startups, maximizes economic returns in the short term, and also offers valuable intangible benefits that strategically position corporations against their competition. Collaborating with a partner like Byld helps to rapidly multiply the invested value and obtain sustainable competitive advantages in the long term.