Introduction 

 

This week I am going to spice it up with VC innovation. Have you ever heard of Bain’s Venture Capital as a Service (VCaaS) platform? If you haven’t, stay tuned to understand why this model has gained the attention of some of the biggest names in the corporate, start-up and consulting ecosystems.

 

What is VCaaS?

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The most traditional way big contemporary multinationals stay in touch with investing in the start-up world is through the Corporate Venture Capital (CVC) model [1]. It consists of an internally devised department that follows the trends and venture opportunities that may be beneficial to the organization [2]. The theoretical reasoning behind this is that said batch not only seeks to find the most profitable investments but is acutely focused on creating strategic cohesion in those long-term investments. Although current figures support this thesis, the costly endeavor of setting up this type of internalized or directly subsidiary branch is something that many corporate executives don’t desire to venture into [3].

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Thus, the most recent transformation has seen the creation of a model where the start-up investment analysis is either partially or completely externalized to an organization or team of pure VC focus [1]. And yes, in case you were wondering for even a second, the prospects have mainly emerged from Silicon Valley as usual. Bain, Pegasus Tech Ventures, Redstone, Touchdown Ventures and all the other major players in the space have leveraged global networks and experience that allow large multinationals to simply put a finger on the map and give an investment threshold, leaving the rest to the service provider [3].

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A Rising Model of Innovation?

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Although the CVC model has been working exponentially well for leading companies ranging from Google to Salesforce, at this rate of innovation it seems unlikely that the VCaaS phenomena will not gain further traction [4]. Where internal departments for innovation have not been already set up, the simplicity of outsourcing the matter is far too attractive for pressured executives thinking about rising costs. In organizations in which they exist, dismantling them is not necessary for VCaaS presence. They can substantially extend their geographic reach without a significant rise in costs. Also, upon the rise of this mixed model, VCaaS might slowly but surely overtake the internally built, less well-networked and far more costly CVC structure [1].

Perhaps the concluding question aspiring consultants should be asking themselves is whether Bain has spent their resources and efforts to design this service wisely. By now you must know they usually foresee the trends far before the rest of the market. My pro-VCaaS view is clear but that question is the one I’ll leave for you to reflect on.

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Written by Iñigo Sancho, Chief Research Officer at KJC

 

Sources

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[1] Bain & Company

Written by Iñigo Sancho, Chief Research Officer at KJC

https://www.bain.com/vector-digital/vc-as-a-service/

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[2] Forbes

https://www.forbes.com/sites/sanjitsinghdang/2021/08/21/venture-capital-as-a-service-driving-innovation- agility-for-corporations/?sh=abbe636cc3de

[3] CB Insights
https://www.cbinsights.com/research/corporate-venture-capital-active

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[4] Boston Consulting Group

https://www.bcg.com/publications/2022/corporate-venturing-models

 

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