Corporations experience tight credit and capital every day. Investing is one of the best ways to improve the monetary functionality of businesses – but corporate venture capital, the most common form of corporate investing, has a bad reputation. There’s often inadequate thought and research that goes into these investments, and companies lose more than they invest.
It is possible to make millions through corporate investing, but only if you take the right approach. No matter how you go about it, you can have success in your endeavors if you stick to appropriate strategies and put a little faith in the market.
Here are some top strategies, straight from the experts.
1. Dive into corporate investing with a good reason.
There are a lot of reasons why you might choose to invest your corporate funds. Oftentimes, executives will push funds into a startup because the products support their business or they’re trying to help the proverbial little man.
'I think there’s an assumption that you can use startups as an extension of your own R&D,' says Lucy McQuilken, who was a strategic investment manager at Intel Capital for a decade. 'That’s a false premise. Corporate investors need to think of it more as an ecosystem play: if this set of companies I’m interested in fostering existed, would that create more markets for my products? Are these companies building something my customers demand that I can’t make?'
As McQuilken explains, the idea that you can use startups as an extension of your research and development is false, and companies shouldn’t fall prey to the idea. If on the other hand, you’ve done thorough research and found a startup that compliments your business and offers high returns for your contribution, this could be an excellent strategy for making your fortune. Just make sure everything aligns properly before jumping blindly into anything.
2. It’s okay, and even highly recommended, to ask for help.
Don’t try to do this alone. Making your millions through corporate funds is a process that requires an understanding that you probably don’t have time to develop. Seek guidance in this craft.
'Find ... an individual who is further along on their journey than you,' counsels Timothy Sykes , the self-made millionaire who famously invested in penny stocks to make his first million. 'This person can help advise you, as you move forward in your career and guide you in the right direction(s). Often, they can help you avoid common pitfalls or teach lessons that they learned the hard way. Benefit from their hard-earned knowledge. Listen to them carefully.'
3. Source potential deals through networking.
Building a strong network is the best way to find venture capital opportunities. Through this network, you can learn about promising investment opportunities and startups that closely align with your own goals. As you network, you’ll regularly see opportunities to share your wealth with the expectation of strong returns.
Don’t be afraid to cast your potential deal net overseas. Though the U.S. economy is seen as relatively safe, there are still plenty of opportunities to grow your investments globally, and with the help of a strong network, you’ll find plenty of opportunities that could work well for your firm.
4. Do your due diligence every time.
'Venture capital is fairly lemming-like,' says Kurt Estes with Sikich Investment Banking. 'When the big name VCs come in, everyone else jumps in, without doing as much due diligence as they should. But that doesn’t mean it is a blockbuster idea. You really have to do your own evaluation in a vacuum.'
One of the reasons venture capitalists have developed such a bad reputation is their lack of research before making a deal. They expose themselves to the market without thinking about the consequences or the lack of earning potential within a market.
5. Measure your returns correctly.
This tip cautions against comparing year-to-year totals too closely. Every corporation understands the way business cycles fluctuate, and oftentimes, looking too closely at funding from year to year can send the wrong message. It can lead to over-optimism with today’s investments and increase your risk for making a bad investment.
Each investment should be considered as an individual entity. Each will have its strengths and weaknesses, and no two investments will be alike. You’ll measure your success by looking at the returns you’ve made from each investment compared to what you invested.
Dwelling on the past will hinder your success rather than promote it.