David Horowitz & Eric Budin – The Harbaugh Effect is a virtuous cycle. A school hires a great coach to jump start the process, which attracts top high school recruits, which leads to winning seasons, which generates more revenue to build state-of-the-art facilities, which further fuels better recruiting, more wins and higher revenues. This self-improving cycle is why the University of Michigan was willing to spend more than $5 million per year to lure Harbaugh away from the NFL.
Corporate venture capital creates a similar virtuous cycle. There are four key steps in the process after starting a program with the right managers: 1. generating deal flow, 2. making investments and executing commercial agreements with startups, 3. gaining intelligence into new trends, and 4. generating financial returns. Each aspect of the CVC process reinforces and fuels the other aspects of the process.
Starting a program with experienced venture capitalists is the equivalent to hiring the right coach. The parallels between coaching elite athletes and working with talented entrepreneurs are numerous, and probably the topic for another sports-themed blog post. Suffice to say, venture capital requires a specialized skill set and corporations should bring in the experts.
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