How to Create the Foundation for a Corporate VC Program

By Kaitlin Milliken |  March 16, 2020

Santana Row, a quarter-mile-long outdoor shopping center, lies at the heart of San Jose’s social scene. The mixed-use development blends luxury apartments, classy restaurants, and high-end shopping. However, tucked between the glowing lights of Gucci and Tesla are younger, venture-backed companies. 

On most days, the line for Oakland-founded Blue Bottle stretches through the complex’s courtyard. The coffee joint has become a favorite in the VC community for both it’s pour-over coffee and it’s investment potential. According to Bloomberg, the company raised $120 million in venture funding before Nestle bought a majority stake in the company in 2017.  

As the sun peeks out from behind the clouds, Amish Parashar drinks his cup of Blue Bottle at an outdoor table. He points out Casper and Bonobos, two other high-growth, venture-backed brands with brick and mortar locations along the strip. 

Parashar has long been embedded in the Valley’s venture capital scene. He co-founded the Yamaha Motor Exploratory Fund in 2015, a dedicated $100 million fund for the car company. Today, Parashar is a managing director at Icebreaker Ventures, a fund designed to foster collaboration and investment in the mobility sector. He is also a fellow at The California Institute for Innovation and Development at the University of California San Diego, and a partner at Explorers’ Lab, a future-focused technology think tank.

During a conversation with InnoLead, Parashar emphasized the importance of setting strategy for corporate venture funds. Teams need to choose guiding objectives — whether that be ecosystem building, eventual acquisitions, or scouting trends. However, he says, financial returns must be a top priority regardless of angle.  

“I tend to describe it as a two-layer cake,” Parashar says. “You don’t get to have a second layer on the cake unless you have the first layer. And the first layer…is financial returns. If a company isn’t firing on all cylinders, isn’t doing really well, isn’t growing, it’s going to be hard to imagine strategic returns from that company.”  

Corporate venture capitalists, Parashar argues, should not be held to a different standard than other investors. “No VC should be able to keep their job for too long if they’re making investments that lose money,” he says. “[If a] startup is not doing so well, but they have an area of technology that’s interesting…[and a company] invests anyway…that’s some pretty poor decision making.”

Parashar shares other tips to help teams successfully dive into corporate venturing, including the importance of collaboration, tips for staffing, and mistakes to avoid. 

Advice from Amish Parashar 

  • Collaborate with non-competing companies when looking for venture opportunities. Wins may lie in adjacent areas. 
  • The most successful venture teams combine internal advocates with experts from the ecosystem. 
  • Prepare your legal team to be flexible with startups. 
  • Build a reputation as a fast-moving, helpful player in your ecosystem. 

Collaborate Outside of Your Industry 

Parashar encourages corporate investors to turn to opportunities outside of their industry. He also suggests seeking partnerships with innovators at other big companies. 

“Company by company, we’re seeing this real depth of experience that they’ve built over decades,” Parashar says. “But a lot of the disruption is coming from adjacent areas. It’s not coming from that depth.”  

The future of banking, he explains, comes in the forms of websites and apps. Retailers are moving away from traditional brick and mortar locations to ecommerce or cachierless pickups.  At Icebreaker Ventures, his team gathers corporates together to make investments in those adjacent areas. 

While he acknowledges that intellectual property can make these partnerships difficult, Parashar says that the problem statements are not proprietary. “Who thinks standing in line at the TSA is a good experience? [No one.] There’s no IP around that statement. It’s just a fact of life,” he says. “It’s [just] an understanding of the problems. As it comes time to invent, we have to be a lot more careful.” Non-competing corporates, he adds, are also likely to successfully cross pollinate. 

Pick the Right Staff

According to Parashar, the best teams balance talent from within the company with venture capitalists that are local to the ecosystem. Internal players, he says, “have credibility, trust, and experience at headquarters.” 

Meanwhile, experts in Silicon Valley contribute their networks to the corporate venture capital program. “There’s a huge community of people that are interested in the future here. I have over [the] decades, built up relationships…and connections to startups [and] academic institutions,” he says. Teams should look for those experts when expanding their efforts globally as well.  

Agree to ‘Silicon Valley Standard Terms’

Corporate teams may have a rigorous legal process when it comes to contracts with vendors and other large companies. However, Parashar advises that teams treat startups with more flexibility. “I like to say that we should be working on Silicon Valley standard terms or vanilla terms, meaning a Series A round of investment comes together. [Then] everybody at the table wants that startup to succeed,” he says. “It’s not an adversarial negotiation, but it’s a collaborative kind of growth phase.”

In this scenario, Parashar says, all of the investors at the table should have similar rights. However, new CVC programs may struggle to concede to that type of agreement. “We find that after two or three deals [companies switch to Silicon Valley terms],” Parashar says. 

Build Your Reputation

“It’s very important to contribute to the community before you ask for something from the community,” Parashar says. Having the right reputation in Silicon Valley can help attract partners and lay the groundwork for more successful investments. 

Parashar suggests that corporate venture teams mentor students and host tour groups of their spaces. He also recommends separating corporate venture teams from the corporate day-to-day. Teams with an arm’s-length relationship are able to scout a greater volume of opportunities. 

“But the important thing is that you’re able to say yes, most of the time… ‘Why don’t you come in? Why don’t I come visit you? Why don’t we figure out if there’s some way to work together?'” Parashar says. “You get a reputation of saying yes to meetings…[and] acting quickly when there’s a deal that makes sense, [and] saying no quickly if you need to. That’s a positive reputation to have, as far as I can tell.”