Resolving Muddled Objectives in Corporate Venture Capital

Large companies seeking access to new technologies — as well as the high returns promised by early investments in successful startups — have been establishing corporate venture capital (CVC) units for many years. But returns on those investments can be erratic, and new technologies can be difficult for the parent company to take advantage of. Why do many companies struggle to derive adequate benefits from their CVC efforts? We think that at the heart of the issue is a persistent confusion over objectives that ultimately makes CVCs difficult to sustain.

Dueling objectives have long been a problem: According to a 2015 survey of CVC investors, 79% aimed to support the parent company’s strategic aims, while 76% of respondents from the same sample claimed to prioritize financial returns.1 A 2021 study found that most CVCs still rely on ad hoc structures and governance processes that confuse parent companies and result in weak executive support and frequent shutdowns.2 Our research indicates that many CVCs continue to pursue both strategic and financial benefits, only to discover that these two goals are very difficult to mix in practice. There are no easy solutions to this problem, but our data and interviews have led us to some specific recommendations.

Our primary argument is that, once the parent company and the CVC unit agree on what they seek to gain from investments, that decision needs to drive everything else the CVC does: investment guidelines, team composition, the decision-making process, and the extent of its integration with its parent. Failure to align CVC objectives with parent expectations and then with organizational implementation is likely to be fatal.3

The Spectrum of Investment Models

Strategic-priority CVCs benefit the parent company by investing in startups that provide insight into and access to new technologies, products, services, and business ideas that the parent can take advantage of. Realizing these benefits requires close integration with the parent company’s business divisions. Financial-priority CVCs invest in startups primarily to generate a monetary return. Hybrid CVCs try to give equal weight to strategic benefits and financial returns. (See “CVC Investment Models.”) While financial returns are easily calculated by comparing sums invested to the current market value of a portfolio, evaluating strategic returns is much more difficult, especially when CVCs mix strategic and financial goals.

As of January 2025, our sample of 59 CVCs had adopted those investment models in relatively similar numbers. We classified 21 (36%) as financial-priority leaning, 20 (34%) as strategic-priority leaning, and 18 (30%) as hybrid. We included only CVCs that had made CB Insights’ annual top 10 list in terms of active investments between 2017 and 2024 and were still active in 2025. On average, these CVCs were 19 years old with a recent estimated fund size or investment budget of $749 million.

It’s important to note that most CVCs fall along a spectrum, not at the extremes (that is, wholly devoted to one or the other objective). We do not recommend a strategy on the extremes or squarely in the middle. These positions are difficult to sustain, either because they fail to provide any strategic value or financial returns or because they are mediocre at both. Instead, we suggest that CVCs prioritize strategic benefits or financial returns but aim to gain some benefits in the lower-priority category. In the majority of cases, it makes the most sense for CVCs to focus on strategic investments that yield some financial benefits, since this investment strategy is most likely to identify viable startups that can benefit the parent company. (See “The CVC Spectrum.”) All CVCs, theoretically, have a lower cost of capital than independent VCs, to the extent that they receive money from their parent companies and don’t have to compete for outside investors. Since most CVCs have some financial criteria, their main differentiation occurs in how high those financial bars are and to what extent CVCs access their parents for help with investment decisions.