How to generate new revenue streams with corporate venture building: Insights from the experts

In today's rapidly evolving business landscape, being innovative is not just a competitive edge but can safeguard a company's future. To follow up on our recent study, 'The state of corporate venture building 2024', we hosted a panel with speakers representing the spectrum of roles within the venture building journey. Here's an in-depth exploration, with their insights, on how corporate venture building can be your blueprint for future-proofing your business.

Embracing corporate venture building:A strategic imperative

Corporate venture building is the art of nurturing new ventures within the corporate environment,leveraging the parent company's assets to innovate and explore new markets.This strategy is instrumental in addressing today's radical challenges with equally radical innovations. 'Corporates are uniquely positioned to develop such radical innovations,' Karyna Hornostai, Lead Venture Architect at WhatAVenture, remarked, highlighting the strategic advantage corporations hold.

Indeed, corporate venture building has emerged in recent years as a pivotal force in innovation, with publications like Gartner's Hype Cycle recognizing it as a rising innovation technique. McKinsey also reports that organizations are doubling down on building new businesses, even amid ongoing economic uncertainty. Chief Finance Officers (CFOs) see business building as the most likely strategic action their organizations will take in the next 12 months, beating restructuring and capital structure changes, leading McKinsey to dub venture building the CEO's choice for growth.

That being said,Stefan Peintner, our co-CEO, pointed out that venture building within corporations is not new and has been a method for developing new business opportunities for many years. Amazon Web Services is a notable example of a new unit built from scratch within a corporate setting.

Benefits of corporate venture building

Companies embark on corporate venture building for various strategic reasons, but in our study, we found that 76% of participants highlighted generating new revenue streams. This focus on financial outcomes is well justified.

Sustainable growth

Venture building offers a pathway to sustainable growth, enabling corporations to diversify their portfolios and tap into new revenue streams. For Anja Hintermeier, Head of New Business Development at Wien Energie, venture building filled 'a clear blind spot in terms of digital, asset-light businesses, and innovations not close to the core.' It was key for them to focus on businesses that could scale reliably.

Unfair advantage

The venture building mindset balances the aspiration to be startup-like with the (unfair) advantages of being a corporate, such as leveraging existing resources and securing funding more easily. Startup founders often spend a significant portion of their time on funding, whereas a structured approach in corporate venture building can enable founders to focus more on developing the business.

Long-term value creation

'Our main KPI for success is how much firm value we create. As a family business, it's crucial to create value that lasts over generations,' shared Richard Luetzner, Head of Venture Building at REHAU New Ventures, underlining the long-term perspective that venture building brings.

Four ways venture building can unlock new revenue streams

So, where can corporates begin to look when starting a venture building project and looking to generate new revenue streams? Stefan suggests the following:

1. ‍From B2B to B2C: Venture building can be an opportunity to traverse business models and bridge the gap from B2B to B2C, as was the case for Richard and their venture, LIVLIG.‍
2. Regulatory or technological developments: Such developments can open up new business opportunities. For example, the energy transition in the energy and utilities sector is giving rise to many new businesses that address PV, batteries, and energy storage.‍
3. Changing customer expectations: When another industry sets a new standard, e.g., design or customer interaction, it can bean opportunity for you to reassess your own business and apply the new standards in your industry.‍
4. Technology applications: You can use existing technologies for different products, such as applying your fridge insulation technology in construction.

Success factors for corporate venture building

In our study, we found that the success of corporate venture building hinges on the following key factors:

Fostering top management buy-in

The commitment of top management is crucial. Regular meetings and clear communication channels can facilitate swift decision-making and ensure alignment with the corporate vision. As was the case for Jonathan Grothaus, Founder & Co-CEO of myflexbox – a corporate startup of Salzburg AG. 'It's really important to have access to the top management. We had a clear stage gate process and met all the top management people every 6 to 8 weeks. Having them onboard was really important to know where we are when we have to make a decision on the spot.'

The right team setup

At every stage of the venture, you need different mindsets and experiences. As Stefan explains, for example,at the early stage, it's about validating opportunities, so you need to be able to see the things that others might not see yet. When building an MVP, you must be determined and open-minded enough to pivot when the evidence changes. Later,when scaling, the growth mindset is vital. You need a more structured CEO personality focused on optimizing and making things happen.

Venture building governance

Governance encompasses a set of rules, policies, and decision-making mechanisms designed to ensure that corporate ventures align with the company's overall strategic goals and operate efficiently. 'Expectation management and the right organizational framework are crucial because it's risk capital we are dealing with,' explains Anja. Venture governance clarifies the process, decision-making, and how your ventures can leverage organizational resources.

The unfair advantage of the core business

One of the major benefits of leveraging corporate venture building as an approach to generate new revenue streams is the access to corporate assets. And this should not be forgotten. Jonathan explains, 'It was also key for us to have a clear USP derived from the unfair advantages [of the corporate], which for me is the most important point because we're now six years in, and the USPs that are there are still standing.'

Preparing for the future

In economic uncertainty, the imperative to innovate becomes even more pronounced. 'Especially in these times, we also see interesting opportunities...to make the shifts necessary to prepare for what is coming afterward,' Richard noted, stressing the importance of forward-thinking in venture building.

Corporate venture building is a testament to the power of innovation when harnessed within the corporate structure. It offers a promising avenue for businesses to explore new horizons and secure their future in an unpredictable world. As we've seen,success in this endeavor requires a blend of strategic foresight, executive commitment, and a culture that embraces change and innovation.

Want to watch the panel? View the recording here.