Hatched Unicorns: Corporate + VC
Venture capital (VC) thrives on risk. Corporations prioritize sustainable growth. High-end VC firm Andreessen Horowitz (AH) often pushes the boundaries of traditional VC and constantly experiments with new strategies and pivots quickly when strategies fall short.
New collaboration
Now, AH and Eli Lilly are rewriting the playbook with a pioneering Biotech Ecosystem fund. This collaboration has the potential to redefine how Corporate VC (CVC) drives innovation—not just in biotech, but in emerging industries. Here are three key lessons from this partnership that VCs, CVCs and entrepreneurs can use to build the next wave of unicorns.
#1. Unicorn lead developers own early stage venture risk
Corporations prioritize stable and growing cash flow and avoid high-risk ventures. In contrast, VCs bet on future valuations and accept high risks. Target corporate returns, as measured by the weighted average cost of capital (WACC), are relatively modest compared to aggressive VC target portfolio returns of 25% or more per year. This disparity is because about 80% of VC investments fail due to the inherent risk in emerging industries and ventures. To offset this loss, the remaining 20% must post high profits to compensate investors. Examples of home runs include:
· Instagram, where VCs doubled their investment in about a week.
· eBay, where Benchmark Partners invested about $7 million and raised about $2.4 billion in about 18 months.
#2. Lead Developers of Unicorn Master Stage Investment
Corporations typically invest larger amounts in mature projects with predictable cash flows, reducing their risk. However, VCs focus on high-risk, high-potential early-stage ventures. To manage this risk, they invest in tranches, investing additional capital if milestones are met. They also require very high annual returns, up to 80% – 100%, in very early stages. This disciplined approach balances risk and reward, forces startups to prove potential, and increases capital effectiveness. By partnering with AH, Lilly can leverage this expertise.
#3. Unicorn’s core developers blend financial development and entrepreneurship expertise
Top VCs do more than just provide funding. They also provide expertise and access to top tier networks of markets, talent, advisors and alliances. These networks and access can help CVCs advance biotechnological advances.
The Missing Link for CVC: Coaching Unicorn-Entrepreneurs to Achieve Strategy Aha!
Success in CVC biotech is primarily based on product development and regulatory approval. But in non-biotech industries, where most unicorns are built, entrepreneurial success is based on finding the unicorn’s strategy to dominate the emerging industry and developing the skills to execute. Top VCs like Andy Rachleff (co-founder of Benchmark Capital) invest after entrepreneurs validate their strategy – the “Strategy Aha” moment, change CEOs up to ~85% of the time and yet fail in about 80% of ventures theirs. THE success without being replacedabout 18% of $87 billion entrepreneurs used startup, launch, and leadership skills to delay VCs and screen VCs; and 76% avoided the VC to retain control of the venture and the wealth created.
The Corporate VC Playbook: Developing the Unicorn-Entrepreneurial Ecosystem
Philipp Willigmann, corporate entrepreneurship and ecosystem expert (www.u-path.com), notes that “This new alliance represents an important step forward – corporates can benefit from VC’s agility, while VCs can leverage corporate networks and capital. However, what is still missing is a new ecosystem that combines Corporate VC with Unicorn Ventures, especially for non-biotech industries and early-stage ventures that lack the proven track record that VCs typically require.So the real benefit of this alliance is that it addresses a key CVC need for expertise. But in emerging non-biotech industries, many billion-dollar entrepreneurs imitated the product but improved the strategy. Entrepreneurs who followed this emulate-and-improve strategy included Steve Jobs, Michael Dell, Jeff Bezos, and Brian Chesky This means that CVCs must build a unicorn-entrepreneur ecosystem of entrepreneurs and entrepreneurs to bridge the gap from idea to Aha strategy with skills They cannot rely on capital or technology alone.
The unicorn-entrepreneurial ecosystem to bridge the gap involves three key steps:
· Training of all entrepreneurs and potential entrepreneurs: Entrepreneurs and entrepreneurs in the corporate ecosystem must be trained in the strategy, initiation and leadership skills needed to succeed. The potential of an entrepreneur is not always visible from the field. Appearances can be deceiving. Even Steve Jobs faced numerous rejections from VCs.
· Use of corporate networks: By connecting startups with key partners, customers and suppliers, CVCs can help accelerate market traction.
· Approval of staged growth financing as VCs: Instead of large upfront investments, funding should be based on milestones, consistent with the progress of the venture.
MY TAKE: The partnership between Andreessen Horowitz and Eli Lilly illustrates how corporations can bridge the Aha gap – in biotech. But to unlock the potential in non-biotech industries, corporate venture capital must evolve and shift its focus from funding technology to building an ecosystem of unicorn entrepreneurs that trains financially savvy entrepreneurs and entrepreneurs, equipping them with the skills to promote long-term growth and unicorns. innovation.
