These days, in the business world, all the talk is about innovation. Questions are often asked about how can companies continue to innovate after their initial good idea(s) and entrepreneurship begin to wane. That question has, even more, pertinence to family businesses, which are often run two or more generations away from the innovative first generation that propelled the business forward in the first place.
This week, Family Capital looks at corporate venturing and how it offers an interesting and useful way for family businesses to innovate in the 21st century. Corporate venturing is venture capital and private equity done by a company – there is no third party investment firm involved. Typically, companies will set up another company, or an internal subsidiary, to be its corporate venturing arm.
The benefits for family businesses of corporate venturing are arguably considerably greater than for non-family businesses. This is discussed in our weekly Viewpoint: “Why corporate venturing makes a lot of sense for family businesses”. Spencer Burke, a financier and academic, argues that corporate venturing can reinvigorate a family business. A corporate venturing company can also be a very useful way to engage the next generation with the family business.
Family Capital also looks at a very recent corporate venturing initiative by the Swiss logistics group and family owned, Kuehne + Nagel. Using its considerable information on trade flows, Kuehne + Nagel has set up another company to monetize this data. The article also highlights the increasing importance of big data and how even smaller family businesses might be sitting on valuable information they can sell.
Although the link between family offices and corporate venturing is more tangential, there are potential opportunities. Family offices linked to businesses could provide a conduit for corporate venturing opportunities, particularly when it comes to those connected to financial-type products and services like big data. Entrepreneurial family offices can suggest ways family businesses can develop corporate venturing businesses.
Of course, there is a potential flip side to corporate venturing when it comes to family offices. Some family businesses may ask themselves whether a family office is required if they are to set up a corporate venturing initiative.