One of the most effective ways for companies to strategically deploy capital to drive future growth and financial returns is through CVC. CVC investing should be a critical growth driver in every CEO’s and CFO’s toolbox — along with M&A, market expansion and new service/product development.
In tumultuous times, when CVC programs are often among the first victims of cost-cutting measures, they are in fact more important than ever.
Need for corporate venture capital in tumultuous times
When businesses and economies hit a bump in the road, the natural instinct is to take defensive measures. But the COVID-19 pandemic will create much more than a bump. All businesses will be forced to expertly traverse a treacherous mountain filled with numerous unforeseen existential dangers.
Taking steps to secure near-term revenue, reducing costs, managing cash flow and maintaining liquidity are of course important actions for all companies. However, now is not the time to be exclusively defensive, but instead, it’s the time to act strategically and seize the opportunity to secure the company’s long-term future.
History has shown that incumbent companies that emerged from recessions stronger than they were before the economy went downhill, all shared one key characteristic: unlike their less forward-looking competitors, these companies were committed to maintaining (or increasing) investments during the tumultuous time.
Data has shown that corporates who have been the most active CVC investors have outperformed their peers and the overall market in both the short term and the long term.
