Corporate VC: A Flawed Concept? –

During the current down cycle in the venture capital market, traditional venture capitalists are taken a beating and having to roll with the punches: troubled portfolio companies, negative returns, virtually non-existent exit opportunities, and somewhat bleak future to look forward to. The only group that may be suffering more are corporate venture capitalists.

To be sure, numerous corporations have abandoned VC efforts over the last 12 months. Collectively they have written down $9 billion worth of venture investments in the first quarter of 2001, with another bloodbath expected in the first quarter of 2002. However, most corporate VCs insist they’re in the venture business for the strategic benefits, not financial benefits. The stellar returns were just the cherry on top.

Now with corporate earnings down and intense shareholder scrutiny, corporations are clearly focused on their core business, and VC is no longer a top priority. Amid this new focus, many corporations are conceding that VC did not provide the strategic benefits they initially sought.

In this month’s cover story, Associate Editor Charles Fellers talks with corporate VCs and industry participants seeking to answer the question: Is corporate VC a fundamentally flawed concept?

Also in this issue, Senior Editor Alistair Christopher takes a look at the increasingly strained relationship between general partners and limited partners.

The shift in power from GPs to LPs has resulted in a demanding LP community that has a lot to say.