Strategic Returns Emphasized by CVCs – A New Approach to Innovation Creation

According to the "JAPAN CVC SURVEY 2023" conducted by FIRST CVC, it has been revealed that the strategic returns emphasized by Japanese corporate venture capital (CVC) have significantly evolved from traditional approaches.

Shift in the Perception of Strategic Returns

According to the survey, CVCs are increasingly focusing on broader value creation rather than just business synergies. Notably, there is a stronger emphasis on developing new businesses in different areas from existing operations and transforming core businesses.

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Characteristics of High-Performing "Leading CVCs":

1. Balancing Strategic and Financial Returns

- Pursuing strategic value while maintaining financial profitability
- Establishing clear criteria for investment decisions‍

2. Relationship with Core Business‍

- Tending to avoid excessive ties with existing businesses
- Maintaining independence while seeking synergies when necessary

3. Focus on New Business Creation

- Emphasizing innovation and exploring new investment areas beyond existing business boundaries

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Examples of Strategic Value:

CVCs emphasize the following strategic values:

• Exploration and acquisition of new technologies and services
• Promoting digital transformation in existing businesses
• Creating opportunities for entry into new markets
• Participating in innovation ecosystems
• Transforming organizational culture

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Challenges and Solutions:

Key challenges in pursuing strategic returns include:

• Difficulty in setting investment criteria
• Aligning interests with core business units
• Long-term value assessment methods
• Achieving strategic synergies

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Conclusion:

The approach to strategic returns in CVCs has evolved from focusing solely on business synergies to creating broader innovation. Successful CVCs need to balance strategic value with financial returns while maintaining an appropriate distance from core businesses. It is expected that more Japanese companies will expand their CVC activities to create multifaceted value.

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