The Three Internal Barriers to Deep-Tech Corporate Venturing

The flow of capital to deep-tech startups is rapidly becoming a torrent. From 2016 to 2020, annual investments in startups focused on commercializing emerging technologies such as biotechnology, robotics, and quantum computing grew in value from $15 billion to $60 billion worldwide, with the average private investment more than tripling in size. Deep-tech corporate venturing (CV) — the second-largest source of this funding — grew from $5.1 billion in 2016 to $18.3 billion in 2020.

The intent behind these deep-tech corporate investments is clear. In theory, deep-tech CV enables companies to quickly gain expertise in leading-edge technologies and pursue potentially disruptive innovations without building internal capabilities from scratch. In reality, however, such funding can come with high hurdles, such as time-to-market durations that often exceed five years, and the greater risk inherent to novel and complex technologies. The difficulties are underscored by an analysis we conducted using CV data from 46 international companies that was collected under the auspices of IESE Business School in 2018. It revealed that 68.9% of the initiatives failed to deliver their expected results.

To better understand the most significant barriers to success in deep-tech CV and the tactics that chief innovation officers (CINOs) can use to achieve more positive results, we turned to East and Southeast Asia for our new study. (In 2019, Asian companies accounted for 40% of corporate venture investments in startups, the largest percentage globally.) The study included an analysis of CV in 180 companies and interviews with 77 of their innovation executives, most of whom work in companies with CV portfolios that include a 25% or greater concentration of deep-tech startups. It revealed three internal barriers that CINOs commonly encounter with deep-tech startups and the ways in which they can be overcome.

Barrier 1: Not-Invented-Here Syndrome

The first barrier is a familiar one. Too often, corporate R&D teams prefer to develop technology internally rather than collaborate with external partners. Thus, when CV teams propose an external innovation to bridge an internal technology gap or open a new growth avenue, R&D resists. This resistance is often rooted in the fear of losing control of the technology or in doubts about the capabilities of the startup. In any case, collaboration proposals can be rejected without further analysis, and growth opportunities are lost.