Corporate venture capital (CVC), distinct from corporate venturing, is the investment of corporate funds directly in external start-up companies. Corporate Venturing refers to when a company supports innovation and new projects internally.[1] CVC is defined by the Business Dictionary as the "practice where a large firm takes an equity stake in a small but innovative or specialist firm, to which it may also provide management and marketing expertise; the objective is to gain a specific competitive advantage.[2]
The definition of CVC often becomes clearer by explaining what it is not. An investment made through an external fund managed by a third party, even when the investment vehicle is funded by a single investing company, is not considered CVC. Also, investments that are considered “corporate venturing”, whereby a company invests in a new internal venture that is distinct from its core business, but remains legally part of the company, is not CVC.[3] Most importantly, CVC is not synonymous with venture capital (VC); rather, it is a specific subset of venture capital.
In essence, it is best to think of CVC as a subset of venture capital whereby a company is investing, without using a third party investment firm, in an external start-up that it does not own.