Are Sharks more Dangerous at Dusk or Dawn? Timing of CVC Investments and Ventures’ Commercial Performance

The evidence on how corporate venture capital (CVC) investments affect investee ventures’ commercial performance is mixed. A way to disantgle conflicting findings is to look at timing of CVC investment. In fact, recent studies showed that timing of ventures’ resource acquisition is crucial for venture outcomes, yet, overlooking the role of incumbents as resources channel for ventures, and the tradeoffs associated with such timing. Building on resource dependence theory (RDT), we explore how timing of CVC investments alters the power balance between corporate investors and backed ventures, which consequentially influences ventures’ commercial performance. We further examine how timing of board seats – when a CVC investor acquires a board seat in the investee venture - further affects this relationship. Using a dataset of 294 Norwegian new ventures active in knowledge-intensive industries from 2004 to 2015, we offer evidence for a differential effect of early- vs. late stage CVC investments, so that investments in late stage ventures significantly increase commercial performance. We further find that associating a venture board seat to a CVC investment moderates this effect, so that ventures are associated to greater performance when late stage investments come without an investor board seat. Exploring these findings further, we suggest that board seats – as opposed to CVC investments without board seat – prevent ventures from forming investment ties with new CVC investors later and can also result in other corporate investors divesting their equity.