Staying clear about your "why" and sticking to that is critical for the formation of a successful CVC. 
Analyzing CVCs through The Academic Lens with Gary Dushnitsky
Oct 6, 2023
In our 53rd episode of the Corporate Venturing Insider Series, we met Gary Dushnitsky, an esteemed professor at the London Business School. He shared insights into his journey within corporate venturing and how those best practices guide his career today.
CVCs and Academics
Gary began by tracing his journey back to a pivotal juncture in the late 1990s, during the dot-com bubble when his interest in corporate investors was peaked by recent synergistic investments in startups. As he immersed himself in the corporate venturing world, he uncovered that this narrative of corporate-startup symbiosis was far from straightforward. This revelation sparked his two-decade career dedicated to unraveling the complexities of corporate VCs.
“Over the last decade I’ve been a faculty member here at London Business School which allows me to open my eyes and look at venturing, not just in the US but globally,” Gary explains. “A lot of my academic work is around entrepreneurial finance and corporate venturing, I also do consulting and teaching in this space.”
By engaging with startups, corporations glean not only innovative prospects but also refine their internal R&D endeavors through an experimental lens. As he navigates the discourse, he accentuates the imperative of effective communication strategies to foster a profound comprehension of the intricate mechanisms at play.
“The big tragedy of any single startup is that when they fail, they fail. I think the big advantage for a corporation is that they can internalize those insights from the failure and then realign or better calibrate their portfolio,” says Gary.
When asked about his ideal CVC, Gary described a thriving CVC program discerning both propitious ventures for investment and those to sidestep. Amidst the backdrop of entrepreneurial vicissitudes, the wisdom amassed from failures emerges as a beacon for recalibrating corporate portfolios. These discernments assume paramount importance as they enable corporations to strategically prioritize pursuits and navigate potential pitfalls adeptly.
The Modern CVC
Breaking away from historical waves, Gary identifies four distinct characteristics that set modern CVCs apart. At the forefront is the trait of longevity, a statement of their establishment as enduring corporate functions. The emergence of numerous CVCs that have persisted for decades, showcases their evolution from being CEO pets to vital corporate entities. This transformation has elevated CVCs beyond transient whims to essential components of corporate strategy.
Drawing parallels with distinct marketing strategies within companies, he underscores that while all CVCs share a common function, their aspirations vary significantly. Beyond the traditional technology-oriented focus, he identifies a spectrum of objectives. CVCs are no longer limited to identifying cutting-edge technologies, they also must work on fostering an innovative startup constellation as Gary describes, or nurtuing an ecosystem around a specific technology. With this in mind, it’s clear to see the role of CVCs transcending from mere innovation to becoming the enablers of multifaceted corporate strategies.
Knowing your Why
Deep-diving into the purpose of CVCs, Gary was challenged with the following question: What if the application of the power law isn’t uniform across all CVC initiatives? Here he introduced the idea that the strength of the power law might vary based on the underlying purpose of the CVC initiative and he identifies two distinct “whys” to illustrate his point. On one hand, if the driving motivation behind a CVC initiative is to foster an ecosystem of partners, then the conventional power law dynamics might not wield the same force. In this context, the CVC’s focus shifts from spotting singular disruptive innovations to nurturing a network of collaborative startups.
Conversely, if the CVC’s purpose is to anticipate and capitalize on disruptions that lie five or ten years ahead, the power law regains its prominence. With knowing your why, it is also critical to understand how to design the initiative to meet your mission. Here, Gary explains the “copy-paste” method and stakeholder management. The former involves emulating successful CVC structures without tailoring them to the organization’s unique needs, while the latter navigates the intricate web of stakeholder expectations, often leading to a compromise that might dilute the alignment with the CVC’s original why.
To overcome these hurdles, the need for thoughtful design is critical. Gary highlights the importance of identifying the right compensation structure that aligns with the CVC’s overarching purpose. This requires a deep understanding of the organization’s context, a clear articulation of the “why”, and an unwavering commitment to sticking with the design that harmonizes with the purpose.
The Future of CVCs
When considering the future of CVCs, Gary calls for a measured perspective. He acknowledges that while not all Corporate VCs launched in recent years might endure, the same could be said about many emerging managers and even marketing strategies in a rapidly evolving world. He emphasizes the pivotal realization that engaging with the entrepreneurial ecosystem holds value across multiple fronts. Rather than outright dismissal, the future demands discernment in how Corporate VCs are structured. The path ahead isn’t one-size-fits-all rather it’s about tailoring their initiatives to match the unique context and objectives of each organization.
But Gary acknowledges that achieving this level of alignment isn’t just a theoretical endeavor; it requires meticulous effort that is often met hand in hand with challenges. However, his optimism is undiminished. He affirms that with a steadfast commitment to the core “why”, the alignment can be achieved and a successful trajectory can be forged. When reflecting on the path of getting there, Gar notes two distinct junctures in time where existential reflections occur- before launching a CVC and several years after its inception. These reflections, as he points out, stem from the ever-changing corporate landscape and contextual shifts.
His insights offer invaluable knowledge for practitioners seeking to strike a balance between persistently delivering value and adapting to evolving contexts. He espouses the wisdom of preserving the fundamental alignment even in the face of suggestions and modifications. It’s a testament to the power of staying true to one’s purpose, and a nod to the challenges that arise when diverging paths beckon.
