One definition of venture capital is that capital is invested in a project where there is a substantial element of risk in a typically new or expanding business. As an early-stage firm, we at LOUD Capital work alongside entrepreneurs with remarkable stories of success, failure, hardship and risk.
Although an investment can fail at face value, it can still provide a valuable learning experience, which can be applied moving forward. In the process of meeting these fellow entrepreneurs, we come across a continuous flow of innovative technologies in many industries, which could potentially tie into any company.
So, what does a small-to-medium enterprise gain from a VC firm that has its ear to the ground?
Think of VC as an externally managed R&D division
Instead of your own employees identifying new processes, technologies or qualified people for your business, a VC firm is a separate experimental entity that can tie various cutting-edge technologies back to your company to create immense value. This is an entirely different method of creating value and differentiation among your competitors.
Reach out to an early stage VC and develop a relationship; although not all visions align, it can be worth the effort.
As an example, LOUD Capital recently brought an artificial intelligence/deep neural networks technology to an Aerospace company for its digital marketing strategy. This innovative technology is enhancing the company’s current strategy using relatively traditional marketing methods without having to reinvent the wheel. It creates immediate differentiation without the difficulty of validating a recent technology or investing significant capital from the get-go.
We then connected this Aerospace company with another cutting-edge hydrogen energy and car technology as well. The applications of hydrogen power in aviation and aerospace are disruptive.
It’s not always about investment
The primary benefit of going through a VC is that there is no effort on behalf of the enterprise to seek out new technologies or conduct due diligence and establish trust and technological validation with the startup. These are duties performed by the VC instead, thereby relieving the enterprise of the budgetary restrictions that hinder R&D efforts in the first place.
Here’s what you can do to benefit from a venture capital firm without needing an investment from them:
1. Reach out to an early stage VC firm — there aren’t a lot out there.
2. If you have a venture arm or corporate innovation arm, have them partner with an early stage VC for a comprehensive strategy.
3. If you have capital to invest for R&D or intentions to develop a venture arm, consider outsourcing it to a VC, which often has a wider reach with regards to cutting-edge technologies and verified startup companies looking to collaborate.
We invest in early-stage companies, and it’s become an investment format that provides more significant returns than just the financial ones that our investors seek. Have those returns benefit your company by partnering with an early stage VC firm for your enterprise innovation needs.
Dr. Navin Goyal is the Co-founder of LOUD Capital, an early-stage venture capital firm. Navin is an anesthesiologist who has been practicing for over 10 years in a large hospital and ambulatory-based practice. He is also the co-founder of SmileMD, a mobile anesthesia company that is providing more access to care.