Office.com - Thriving Under Corporate Clout (3)

Thriving Under Corporate Clout - Page 3

Going the long-term ROI route

Nobody will actually say this has happened, although a few brave souls will admit it is at least a possibility. "There's just a bigger chance for conflicts of interest," says strategic alliance consultant Langer. "Say a company that's been invested in wants to expand and thinks that in order to grow, it needs to strike a deal with a competitor of its corporate investor. It can get very tricky."

Partnering with a corporate giant can force a company to stick with their technology, right or wrong. "These are all great companies to be aligned with, but you are locked in and are obligated to at least use their product or services," Canouse says.

Looking for the Right One
Many of the newer venture capital funds have set up Web sites or subsets of their corporate sites that explain the type of companies and technologies they would like to invest in and how to apply for VC money.

The executives heading up corporate venture funds are becoming more adept, says Greg Gum of ishoni Networks. "A lot of them have brought in former VCs to run the show or have learned from the traditional venture firms. They've really stepped up the pace."

The current jittery stock market is having the same chilling effect on corporate VC funds as it is on other venture capital firms. Most observers see it as a temporary lull - unless stock values remain depressed for an extended time. That's because if the stock prices are low, private companies, in which these corporate VC funds have invested, won't go public. If they don't go public or get acquired, the corporate VC funds can't exit; that is, they can't get back their investment and return. That could slow down the flow of VC money into start-ups, but it won't happen immediately, says Dorothy Langer. "The whole process will start to shift gears and slow down, but it doesn't stop completely," she says.

"There are still tremendous opportunities in so many areas," says the National Venture's Jeanne Metzger. Besides, because corporate venture capital has two reasons for investing - one, to get a return like all venture capital firms and two, to get access to new technology - chances are that even if traditional (VC) firms bow out temporarily, corporate VCs will still be playing "Let's Make a Deal."

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