July 19, 2019

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Why do Corporates invest in Startups?

Start-ups & investors

Start-ups & investors

Why do they do so? That is definitely the burning question in the corporate circles right about now.

Is Corporate investment necessary for startups? It definitely is, since that would propagate positively for the firms that want to make big in the eventual future. But there is a very good reason as to why they invest in potential startup firms. The theory has been conclusively supported by an assistant finance professor at Yale School of Management, Connecticut. He states the fact that companies invest in startup firms to curb the disadvantages that they themselves face during the course of their business aspect.

The Origin of Corporate Venture Capitalists

Venture Capitalist are the capital investors who invests their money in startups which show huge potential of growth, but ofcourse in exchange equity stake.

The most important factor for startups to receive their funding is through the Venture Capitalists, or so to speak “The Angel Investors”. But the trend is now shifting towards a more prolific term called the “Corporate Venture Capitalists” or CVCs. This is something that was not looked upon by industry pundits and VC firms, and certainly an unexpected development.

The reason that it was unexpected was because of the fact that there would
be possible economic implications, and it was something that experts thought to be unfathomable.

Over the years there has been a steady but constant dip in the innovation factor on the part of corporate firms. The outlook behind this would be that they were not able to adapt with respect to the rising technological advancements, and were falling short on people’s demands. This was the point where corporations started looking to startup firms as an ideal form of investment so that they can tap into their potential and gain some value out of it.

Experts

There can also be a possibility that the corporate firm will choose to become a parent company. If the technology that the startups are working on has a lot of potentials, then the corporate firms would even assist you with their resources to help them grow. There have been multiple striking investments and successful startups in the country that have made their mark and made it big owing to VC interventions or with the help of Corporate firms.

There can also be a possibility that the corporate firm will choose to become a parent company. If the technology that the startups are working on has a lot of potentials, then the corporate firms would even assist you with their resources to help them grow. There have been multiple striking investments and successful startups in the country that have made their mark and made it big owing to VC interventions or with the help of Corporate firms.

Startup Companies- Who made it Big !!

There are so many notable examples from renowned companies that have invested a lot in startups. Some of these famous startups and corporate firms with the investment amounts are listed out below.

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Samsung Entering the Game

There have been concrete reports about Samsung investing in four potential startup firms.

  • A system application company called OSLabs.
  • A speech technology-based startup called Gnani.ai.
  • Solutions provider for Internet of Things called Silvan Innovation Labs.
  • An unnamed computer vision-based startup company.

Samsung has put in a total of $8.5 million across all of these startups which explains the impact and confirms the reasoning behind the investment procedure. Whenever there is an inception of a technology that is fresh and out of the box, everyone loves to get their hands on it. If corporate firms fail to capitalize on this, then that would be a mistake and something that they would regret for some time.

There have been many examples when big firms have fallen prey to technological disruptions that they were unable to handle. This led to the companies falling into bankruptcy, and the startup firms emerged high because they were at the right place at the right time. One of the examples is Nokia, who failed to tap into the limitless potential of Android and continued using Symbian. Eventually, the Company had to shut down for some time until they finally accepted the Android OS.

Conclusion
Startups bring in a fresh breath of air in this conventional world. They act as the disruptors in the market and work with the trends that are currently in existence.

Corporate firms will face multiple advantages if they are doing this investment. The key advantage that they would get would be that they can expand their horizons a lot more than they used to before. They can diversify their business aspects, update their portfolio and be a part of the revolution that drives the digital industry.

 

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