Now is the time to start a corporate venture

If there is anywhere where corporate venture building has really taken off, it’s in Asia. According to a report by EDB Singapore and McKinsey, business leaders in the region expect that more than half of their revenue in the next five years will come from products, services and businesses that do not exist today. A whopping 56% of business leaders in Asia Pacific rank corporate venturing among their top-three business priorities – and so should you. 

In particular, sustainability is seen as the area where the most opportunities for building new businesses lie. This is a trend that we are seeing in Sweden as well. Corporate giants such as IKEA, Scania, Volvo and Vattenfall are leading the way and launching impact corporate ventures like never before (10 Swedish Corporate Ventures). 

There has never been a better time to launch a corporate venture

The economy has slowed down. Consumers are holding onto their money tighter, tech companies are laying off employees, and VC investments have plummeted. Despite that, you might have heard experts saying that now is a great time to launch a new business. Microsoft, Apple, Slack, WhatsApp, Uber, and Spotify are just a few multi billion dollar companies that have launched during times of economic downturn. As Inka Mero, Founder and Managing Partner at Voima Ventures puts it “Many of today’s unicorns have been founded or built during recessions or downturns – resource scarcity can be a source of creativity and pivoting”. 

What makes this economic downturn particularly promising? Why should you launch a corporate venture, and why now? There are a number of factors coming together right now that can only be described as the perfect storm for corporate venturing.

 

Early-stage funding, top talent and technical infrastructure

First of all, there are three main reasons why the market conditions to start new businesses are exceptionally favorable right now. 

While VC investments, as mentioned, have been going down lately, two things should be kept in mind. The recent decline is often compared to the numbers we saw in 2022, which was a year with astronomically high numbers considering VC funding. Moreover, the slowdown has primarily been affecting later-stage funding. The reality is that for early-stage funding, there is still a lot of capital available to those who are willing to take the leap. 

Furthermore, there is a large supply of high-quality competence available on the market at the moment. As tech giants are letting large parts of their workforce go, there are a lot of hungry and highly skilled people out there looking for their next adventure. It’s a great time to hire the right people to help run your new business, or even to find a co-founder.

Finally, the technical infrastructure has recently reached new heights, opening up for endless opportunities. Startups are already utilizing AI chatbot ChatGPT instead of hiring new personnel, and on March 1st the company behind it, OpenAI, announced that they are launching an API for ChatGPT that is specifically designed for enterprises. These advancements in the technical infrastructure opens up for an affordable and efficient way for businesses to build new products and services. 

Corporate venturing gaining momentum in Asia Pacific 

All of the above mentioned reasons are equally as relevant for a corporate startup as any other. For a corporate venture to succeed, you want the market conditions to be as favorable as possible, and currently they are better than ever. 

However, there are also other reasons why now is the right time to start a venture in a corporate context. Perhaps most importantly, there is growing evidence that the market for corporate venture building is maturing. 

The last couple of years, venture building has grown to become an integral part of corporate strategy, especially in Asia Pacific (APAC). We mentioned that 56% of business leaders from the region consider venture-building a top-three priority. This number can be compared with only 20% of business leaders in APAC prioritizing this way just a few years ago. What’s more is that among the 56% that are investing in venture building at the moment, 20% rank it as their number one priority. 

Historically, Europeans tend to be more conservative when it comes to adopting new models and investing in new ideas. But with Asia emerging as a new economic center, we can expect that the interest for venture building will spill over to other parts of the world as well. If European corporations are to remain competitive, they must recognize venture building as a real and important strategy. 

Business logics are changing

During an economic downturn, traditional business logic suggests cutting costs and concentrating on the core business. However, in a recent study by ADL, only 32% of CEOs this year are focusing on the core to grow their business, a number that is down from 55% just three years ago. So then, what strategies are businesses using to navigate the recession? The study shows that many are instead prioritizing new initiatives, with digital innovation emerging as the top factor for future growth across all global markets.

As venture building is gaining momentum and the conventional business logic is changing, business leaders can no longer sit back and wait for opportunities to come their way. It is time to capitalize on the unique circumstances that exist at the moment and take action. Now is the time for corporations to start building the winning businesses of tomorrow.