How, When and Why to Use the Corporate Venture Capital (CVC) Model

Summary

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• The first question for a company to ask is whether and how it should establish or use a CVC model for its strategic initiatives in Asia
• Commercial considerations include the nature of the investment team; alignment of compensation and incentives; autonomy and control; and tax, accounting and regulatory issues
• There are many other factors to take into account including the structure's complexity, maintenance costs, ease of deal execution governance process and control rights over investee companies
• The various potential legal forms of the CVC each have their own merits and drawbacks

In June 2024, Porsche Ventures, the corporate venture capital (CVC) arm of Porsche, announced the launch of a China-focused venture capital fund in collaboration with China International Capital Corporation. According to the press release issued by Porsche, this fund "will be the exclusive channel through which Porsche invests in early-stage startups in China over the coming years." This announcement is welcome news, as it marks one of the few closings of China-focused investment funds in 2024.

This Porsche fund is not alone. Industry heavyweight Apple opted for an external investment fund manager model instead of an internally managed CVC arm. In March 2024, the Restore Fund announced that it raised an additional US$50 million from TSMC of Taiwan and US$30 million from Murata of Japan to bolster the US200 million that had been committed by Apple in 2023. This new fund is reportedly co-managed by HSBC Asset Management and Pollination, rather than by Apple.