Corporate venture building's popularity is on the rise, as it enables large enterprises to explore interesting business models separate from the core business and launch successful corporate ventures in the form of new startups.
Yet many of these organizations don't quite understand what corporate venture building entails, given there are many different definitions of the approach, or the value it can offer them in terms of insights generated.
What is corporate venture building?
Corporate venture building is a transformative innovation approach that enables scaled enterprises to build new companies (ventures) that live and thrive outside the core business. These startups are able to solve big problems or address relevant themes of interest to the corporation, their partners, and/or their customers.
"We often think about building external, independent, venture-backable startups as a way for corporations to tap into innovation that would otherwise be hard to do internally," High Alpha Innovation CEO Elliott Parker said on the Inside Outside Innovation podcast.
"Startups, it turns out, are a great way to run experiments," Elliott added.
Many corporations invest in existing startups to create entirely new revenue streams and drive revenue growth.
There's value in corporate venture capital (CVC) business units backing early-stage startups that show promise (i.e., those whose solutions have a strong product-market fit and that have a growing customer base).
But we are a proponent of a different approach we dubbed “venture building.”
Rather than focusing on internal ventures, venture building is focused on building new, standalone startups as external ventures. We believe this is the only way to effectively overcome the innovator’s dilemma and successfully disrupt yourself.
A number of large enterprises — including many Fortune 500 companies — are now using corporate venture building to augment their investment portfolios and merger and acquisition activities. Some even utilize the approach to cope with 'black-swan' events that disrupt their businesses.
This is what our business at High Alpha Innovation is focused on — venture building at scale with corporations. We build advantaged startups with corporations that live outside the core business.
These companies are created in close partnership with C-level decision-makers and innovation leaders and operate completely outside the main corporate environment.
Additionally, instead of funding venture building with operating expenditures, many corporations finance their startup-creation efforts with balance-sheet capital. This affords them more patience with seeing return on invested capital from companies they launch, since the work doesn’t affect their P&L.
The state of corporate venture building
Recent data shows many corporations are now building ventures to future-proof their organizations:
- A 2024 McKinsey report found that large corporations who allocate roughly 20% of their growth capital into venture building see greater revenue growth (by an average of 2 percentage points) than enterprises that don't build external ventures.
- An EY survey of global executives found the most common financial sponsors for venture building at their organizations in 2024 are Chief Executive Officers (37% of the time), followed by Chief Financial Officers (31%) and Chief Growth Officers (25%).
- A 2023 Bain study found corporate executives think about 40% of their organization's growth through the end of the 2020s would need to come from new business models and markets they've yet to enter, making venture building an enticing option.
Our partners are prime examples of large enterprises thinking beyond core operations to build new ventures:
- A top-5 pharmaceutical corporation partnered with us to explore venture-building opportunities that would tackle notable operational issues that it and other drugmakers faced. The initial goal was to aid its internal workforce and get other pharma companies to become customers of a startup it could create.
- Our work led to the creation of Revisto. Revisto's software platform accelerates Medical, Legal, and Regulatory (MLR) review cycles for pharma marketing and legal teams by providing AI-powered content recommendations and streamlining the process.
- More efficient and expedited MLR reviews using Revisto has the potential to save pharma organizations up to millions of dollars annually, as it prevents delayed releases of pressing marketing materials tied to new drugs they bring to market.
It's this kind of transformative innovation approach away from the core business that can unlock new avenues for business growth — and generate learnings that can be used to create even more companies — for corporations.
The corporate venture building process
"I see the value of this approach, but why should my company work with an outside venture builder to create these startups? Can't our innovation team and research and development department do this on their own?"
It's easy to see why many executives think this. The truth is corporate venture building is more complex and nuanced than they realize, especially if they decide to create a venture studio to launch companies at scale.
Without a corporate venture builder partner, enterprises must:
- Establish processes and decide on logistics for in-house venture building. This is something the C-suite should spearhead. But since they have a concerted focus on the core business, oftentimes, nobody else steps up to take ownership of planning, which prevents their organization from even getting started with startup creation, let alone launching new companies.
- Agree on the primary goal(s) behind their venture-building aspirations. This is easier said than done, especially when there are multiple business leaders with distinct opinions on what they deem low-hanging-fruit innovation opportunities and market 'gaps' to address through startup creation.
- Find top entrepreneurial talent to fill founder roles on their own. The common thinking is corporations can simply attach someone at their organization to take over any external ventures they create. The issue is intrapreneurs lack the expertise of those who've actually run a high-growth, early-stage startup. That means executive teams must conduct a thorough, outside search to find the ideal founding CEO — a time- and labor-intensive task. This is often a muscle that also simply doesn’t exist at corporations. By their very nature, they are not set up to attract, incentivize, and retain startup founder talent.
Meanwhile, partnering with an outside venture builder:
- Provides corporations with structure and a dedicated forcing function. Corporations don't have to worry about red tape and roadblocks derailing their venture-building efforts, when they have an external venture builder with a clear framework for executing each stage of the startup-creation process, including target dates to complete each phase.
- Offers assistance with narrowing down venture-building theme(s). Corporate leaders often need (and greatly benefit from) an outside perspective to help them determine which 'Jobs to Be Done' are worth investigating. For some, it may be developing a new capability or tackling societal problems. For others, it might be exploring growth areas in a specific sector or addressing customer pain points.
- Allows them to rapidly test, validate, and advance business concepts. Speed is where most internal corporate venture building programs fall flat. There's often no sense of urgency for those assigned to ideate and evaluate startup options to move quickly. Outside venture builders can move rapidly — from 100-plus high-level business ideas, to 10 or so specific company concepts, to a few finalists they can build business models around and, ultimately, present to decision-makers.
Finding a top venture builder to work with
That's not to say all external venture builders are the same.
There are different 'flavors' of venture-building partners available to corporations, each with their own approach to creating venture-backable businesses with cutting-edge solutions and providing pre- and post-launch support.
If you're thinking about getting going with corporate venture building, you'll want to find a venture builder with:
A proven track record of building new businesses
We don't just mean 'one-off' startup-creation programs or internal products and ventures. Rather, we mean exploring several business opportunities via a venture studio and launching a portfolio of startups over the long term.
For example, High Alpha Innovation has a portfolio of nearly 30 startups we’ve co-created with our partners.
A history of innovating in your particular industry
Whether you're an insurance company looking to create new risk-modeling capabilities or a health system aiming to provide better patient and provider experiences, partnering with a venture builder that has experience in your space can provide the necessary subject-matter expertise to innovate effectively.
A demonstrated ability to select startup themes
Theme selection isn't just about aligning with organizational objectives. It's also about unearthing ideas and problems that no other company — including competitors — has thought to research further or solve.
By evaluating these Jobs to Be Done, you can launch a venture-backable startup that potentially disrupts your sector, positions your corporation as an industry leader, and produces insights you can apply to the core business.
