In previous articles we identified 4 types of open innovation practices incumbents can engage in and we looked at how two of the four can be measured. Specifically how can free and paid pilots be measured and how can acquisitions (M&A) be measured.
Now let’s turn our attention to a third type of open innovation activity: venturing, more commonly referred to as corporate venture capital, is one of the most popular open innovation vehicle incumbents work. It is so popular and so important for large companies that a good number of them have created spin-off organizations tasked only with investing in startups (eg.: Wayra, Deutsche Telekom Capital Partners, Intel Capital, Google Ventures etc.)
Following the logic of the funnel consisting of 3 phases (Demand, Live and Outcome), acquisitions can be measured as follows:
Measuring the Demand phase for Corporate Venture Capital:
For this type of collaboration and this phase of the collaboration funnel, it is advisable for the company to track the following performance indicators:
- Number of requests received for venturing per unit of time.
- Number of requests sent for venturing per unit of time.
- Average cost of attracting one possible venture candidate per unit of time (this might include the travel budget of the startup collaboration team to certain hubs such as Berlin or San Francisco or certain event sponsorships).
Measuring the Live phase for Corporate Venture Capital:
For this type of collaboration and this phase of the collab- oration funnel, it is advisable for the company to track the following performance indicators:
- Number of initiated investments per unit of time.
- Percentage of initiated investments from the total requests received and sent per unit of time.
- Total invested capital per unit of time.
- Average ticket size (investment) per unit of time.
- Average stake taken in ventures per unit of time.
- Progress in accordance with a pre-agreed roadmap of the joint venture.
- Progress towards pre-defined goals.
Measuring the Outcome phase for Corporate Venture Capital:
For this type of collaboration and this phase of the collaboration funnel, it is advisable for the company to track the following result indicator:
- Average cost of taking a stake in a startup including both the Demand phase cost and the Live phase cost per unit of time.
- New revenue generated per unit of time as a result of investment made.
- New revenue to cost ratio (total cost of venturing incl. the internal costs such as salaries of the responsible people) per unit of time.
- Assets appreciation per unit of time.
- Assets appreciation to cost ratio (total cost of venturing incl. the internal costs such as salaries of the responsible people) per unit of time.
- Collaboration specific outcomes which will most likely vary from venture to venture but they should be mutually agreed upon at the beginning of each collaboration (e.g. market capitalization etc.).
In a next post we will be looking at the indicators for another the last remaining type of open innovation initiative: joint venutres.
