Corporates in Africa, more than ever before, indicate that they are actively rolling out programmes to incorporate, deal with and invest in start-ups. This is important for Africa as this middle element has been largely missing in the economy despite legislation such as BBBEE, some tax incentives (different for different countries) and start-up acts in Africa. African start-ups have seen specialised investment streams such as Imperial, Naspers, Telkom, Tiger Brands and Multi-Choice. Amazon Web Services (AWS) is active in investment, support, partnerships and integrating start-ups across their client base globally. Programmes such as Nestlé’s “Hatcher” also focus on bringing tech from the outside in working with inventors, innovators and small businesses. Others who do it in Africa include Standard Bank, Nedbank, Lireas Holdings, MTN Group, Orange, Smollan, Umkhathi Wethu, Goldman Sachs and MFS Africa.
Sander van der Blonk defines it as “Collaborative Innovation whereby corporates and startups jointly develop transformative ideas and solutions in which both sides take a risk and share in the rewards.”
The difference then between corporate venturing and venture capital is that in corporate venturing – the bigger company does not end up owning the start-up. Shareholding might come later as a result of their agreement but the corporate finds other ways of supporting the start-up in the beginning.
Corporate Venturing can take many forms but most commonly it is done through joint venture agreements and the acquisition of equity stakes. The investing company may also provide the start-up with management and marketing expertise, strategic direction, and/or a line of credit.
A start-up firm can enjoy the large investing company’s:
This relationship can even lead to a partnership between the Corporate Venture Capital (CVC) and its parent firm, which, in turn, can instantly boost a company’s value. CVCs can also be the bridge between investing companies and start-ups, and the facilitation of mergers and acquisitions. An example of this is Snapchat and Instagram, both of which are now owned by Facebook.
The SA Innovation Summit, from 21-22 September, will host two panel discussions on Corporate Venture Capital and Corporate Venturing which aims to unpack the challenges, successes, motivations and lessons learnt from some of the leading companies in this space.
Currently, in Africa, four countries attract most of the venture capital:
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This thought-leadership article series is written by an entrepreneur sharing her thoughts and experience with other entrepreneurs. This series will explore scaling, investing, the African ecosystem and more.
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Dr Audrey Verhaeghe is founder and Chairperson of the SA Innovation Summit. She has founder three companies and is currently scaling the SA Innovation Summit into other African countries. Building the ecosystem of founder -led economic activity is her life long mission that she loves and hope to expand year on year.