Corporate Venture Capital in SMEs: When to Create Your Own Fund

Thesis

The literature on corporate venture capital (CVC) focuses on instruments used by multinational corporations—Google Ventures, Intel Capital, Siemens Next47—that invest hundreds of millions in startups to access adjacent innovation and generate strategic options. This narrative obscures an emerging phenomenon in continental Europe: small and medium-sized industrial, services, and commercial enterprises, with revenues between €10 and €150 million, are creating their own investment funds with a logic distinct from both classic CVC and traditional private equity.

These structures—typically funds of €2 to €15 million, with a 7 to 10-year horizon and a mixed mandate (financial return + access to innovation)—respond to three converging pressures. First: the inability to compete for tech talent in tight labor markets, leading companies to invest in startups to access skills they cannot hire. Second: the fragmentation of value chains that were previously vertically integrated, creating investment opportunities in specialized suppliers already known to the company. Third: the need to diversify sources of return at a time when operating margins in mature sectors are under structural pressure.

Portugal presents particular conditions for this model. The business landscape is dominated by well-capitalized family-owned SMEs, many with excess liquidity accumulated during the 2010-2020 decade, lacking internal projects that absorb this capital at rates of return above 8-12%. Simultaneously, the Portuguese startup ecosystem has matured—Startup Portugal data indicates 2,127 active startups in 2023, compared to 1,200 in 2018—creating a pipeline of seed and Series A investment opportunities that previously did not exist.

This article examines when creating a dedicated corporate venture capital fund in Portugal makes strategic and financial sense for an SME. It develops four central arguments. First, that the decision depends less on the absolute size of the company and more on three structural conditions: existence of structural excess cash, clarity on sectoral investment thesis, and dual governance capacity (financial + strategic). Second, that the Portuguese model diverges from Anglo-Saxon CVC by favoring co-investment with institutional funds and later-stage investments (Series A/B), reducing risk but also the potential to capture radical innovation. Third, that the failure rate of these vehicles is high—market estimates suggest 60-70% of funds are not renewed after the first cycle—but for predictable and avoidable reasons. Fourth, that the alternative to a dedicated fund—ad hoc direct investment in startups—entails higher agency costs and governance issues, making a dedicated vehicle preferable when annual investment exceeds €500,000.

Genealogy of the Concept

The term corporate venture capital appears in management literature in the late 1980s, but the practice predates this. Chesbrough (2002), in the seminal study "Making Sense of Corporate Venture Capital," documents that companies like DuPont and Exxon were already operating investment units in new businesses in the 1960s, though with mandates focused on conglomerate diversification rather than open innovation. The first modern wave of CVC emerged in the late 1990s, driven by the tech bubble: companies like Intel, Cisco, and Microsoft created investment arms to access complementary technologies and establish market standards.

The 2001 crisis exposed the fragility of the model. Gompers & Lerner (2000), in "The Determinants of Corporate Venture Capital Success," show that CVC funds created during tech booms have lower returns than independent venture capital funds, with a median annual difference of 4.8 percentage points. The proposed explanation centers on goal conflicts: while independent funds maximize financial return, CVC units face pressure to invest in strategic areas even when valuations are unattractive.

The second wave, post-2008, is qualitatively different. Dushnitsky & Lenox (2006), analyzing 2,000 CVC investments between 1990 and 2002, demonstrate that companies maintaining CVC programs through full economic cycles—not just during expansions—show superior innovation performance, measured by patent citations and new product launches. This finding shifts the debate: CVC is no longer seen as speculative betting but as an innovation management tool with measurable returns.

European literature introduces important nuances. Röhm et al. (2018), studying 127 CVC programs from German and French companies, identify three distinct archetypes: scouting (small investments, €100-500k, to monitor emerging technologies), enabling (medium investments, €1-3 million, to develop strategic suppliers), and driving (large investments, €5-15 million, to shape sector evolution). Each archetype has different governance structures, time horizons, and success criteria.

What has changed in the last five years is the decrease in the scale of companies operating CVC. Data from the Global Corporate Venturing Report 2023 shows that 23% of new CVC funds created in Europe in 2022-2023 come from companies with revenues below €500 million—compared to 11% in 2015-2017. This democratization reflects three factors. First, reduced structuring costs: platforms like AngelList and SeedLegals allow investment vehicles to be created with legal and administrative costs 60-70% lower than a decade ago. Second, the emergence of co-investment models enabling SMEs to share risk with institutional funds. Third, the maturation of local startup ecosystems, reducing the need for cross-border investment.

Portugal is part of this third wave. The first structured CVC fund by a Portuguese SME on public record dates to 2016—a €5 million vehicle created by an industrial company in the North to invest in automation suppliers. Since then, the CMVM has registered 14 investment vehicles with CVC characteristics linked to non-financial companies, though not all are dedicated funds (some are investment lines within family holdings). The lack of consolidated data reflects deliberate opacity: many companies prefer not to disclose CVC programs to avoid pressure from startups seeking investment.

International Evidence

Research on the effectiveness of corporate venture capital divides into three streams: studies on financial returns, studies on innovation impact, and studies on success conditions. Each stream presents robust findings but with important methodological limitations.

Financial Return: The Underperformance Puzzle

The evidence on financial returns is consistent but counterintuitive. Chemmanur et al. (2014), analyzing 12,000 CVC investments in the US between 1980 and 2008, find that CVC funds have a median internal rate of return (IRR) of 8.7%, compared to 14.3% for independent venture capital funds. The difference persists even when controlling for sector, investment stage, and vintage year. More surprising: companies operating CVC programs show shareholder returns above the sector average in the five years following the program's launch, despite the fund itself delivering lower returns.

This puzzle—fund loses money, company gains value—is explained by three mechanisms. First, knowledge transfer: invested startups share information on emerging technologies and business models that the company incorporates into core operations. Second, real options: CVC investment creates a future acquisition option at a known valuation, reducing disruption risk. Third, signaling: presence in the innovation ecosystem improves market perception of the company's adaptability.

Benson & Ziedonis (2009) test these mechanisms empirically, using data from 317 listed companies that launched CVC programs between 1985 and 2000. They find that the positive market value effect is concentrated in companies from sectors with high technological uncertainty (pharmaceuticals, semiconductors, software) and is absent in mature sectors (retail, construction, transport). Implication: CVC is not a universal tool—it works where external innovation is a relevant source of competitive advantage.

Innovation Impact: Evidence from Patents and Products

Dushnitsky & Lenox (2005), in one of the most cited studies in the literature, analyze 32 Fortune 500 companies that operated CVC programs between 1990 and 1999. Using the number of patents and patent citations as proxies for innovation, they find that companies with active CVC programs show a 12% increase in registered patents and an 18% increase in citations received, compared to control companies. The effect is stronger when CVC investment focuses on adjacent (not core, but related) technologies to the main business.

Wadhwa et al. (2016) refine this finding using product launch data. Analyzing 1,200 technology companies between 2000 and 2010, they show that CVC accelerates time-to-market for new products by an average of 4.3 months, but only when the company maintains a formal collaborative relationship with the invested startup (board presence, resource sharing, joint projects). Passive investment—capital only, without operational integration—shows no measurable effect.

European literature introduces an important caution. Röhm et al. (2018), studying German companies, find that CVC innovation benefits are asymmetric: they concentrate in 20-30% of invested startups, typically those where the company holds more than 15% and has board representation. The remaining 70-80% generate modest financial returns and negligible strategic impact. Implication: CVC effectiveness depends on selectivity and depth of involvement, not the absolute number of investments.

Success Conditions: Governance and Structure

Research on success conditions converges on three critical factors. First, organizational separation: CVC funds operating as autonomous units, with dedicated teams and direct reporting to the CEO or CFO, perform better than units integrated into innovation or business development departments. Hill & Birkinshaw (2014) document this pattern in 89 European CVC programs, attributing the effect to reduced internal political interference and greater credibility with startups.

Second, clarity of mandate: programs with explicit objectives—whether financial return, access to innovation, or both with defined weighting—last longer and generate more value than programs with vague mandates. Keil et al. (2008), analyzing 204 CVC programs, show that 68% of discontinued programs had ambiguous or contradictory mandates, compared to 31% of programs that completed a 10-year cycle.

Third, incentive alignment: CVC teams remunerated based on financial returns make different decisions from teams rewarded for strategic objectives. Gompers & Lerner (2000) document that funds with financial incentives (carry on returns) invest in later stages and less risky sectors, while funds with strategic incentives (bonuses linked to knowledge transfer) invest earlier and in more radical technologies. Neither model is superior—the choice depends on the company's primary objective.

A recent finding deserves attention. Colombo & Murtinu (2017), using data from 850 European startups that received CVC investment between 2005 and 2012, show that startups backed by SME CVC funds have a higher survival rate than those backed by large corporate CVCs (72% vs 64% at five years). The proposed explanation: SMEs invest in more mature startups with more tested business models, while corporations invest in more speculative technologies. This finding is relevant for the Portuguese context, where most companies that could create CVC funds are SMEs.

The Portuguese Case

Portugal presents structural conditions that make corporate venture capital simultaneously more attractive and riskier than in other European markets. The analysis draws on three data sources: official statistics from Banco de Portugal and INE on business structure, CMVM data on registered investment vehicles, and reports from Startup Portugal and Portugal Ventures on the startup ecosystem.

The Portuguese business landscape is dominated by well-capitalized SMEs but with low formal innovation intensity. INE data (2023) shows that companies with revenues between €10 and €150 million represent 0.8% of all companies but 23% of employment and 28% of gross value added. These companies have an average liquidity ratio (cash and equivalents over total assets) of 18.3%, above the eurozone average (14.1%) and significantly higher than Spain (12.7%) and Italy (13.9%). This over-capitalization reflects two factors: post-2011-2014 crisis aversion to debt, and a shortage of internal investment projects with expected returns above the cost of capital.

At the same time, R&D intensity remains low. Portugal invests 1.6% of GDP in research and development (2022), compared to the EU-27 average of 2.2%. More revealing: only 31% of Portuguese SMEs with more than 50 employees report systematic innovation activities, compared to 48% in Germany and 52% in the Netherlands (Community Innovation Survey 2020). This combination—excess liquidity, low internal R&D intensity—creates conditions for external innovation investment via CVC to be attractive.

The startup ecosystem has matured rapidly over the past decade. Startup Portugal data indicates 2,127 startups active in 2023, of which 487 raised external funding in the past 24 months. The total investment volume in Portuguese startups reached €1.8 billion in 2021-2023, compared to €420 million in 2015-2017 (Dealroom data). More relevant for CVC: 62% of this investment occurred in seed and Series A stages, creating a pipeline of opportunities accessible to investors with tickets of €250,000 to €2 million—precisely the range where SMEs can compete.

The sectoral distribution of Portuguese startups shows significant concentration. Information and communication technologies account for 41% of startups, followed by business services (18%), health and biotechnology (12%), and energy and sustainability (9%). This concentration creates asymmetry: SMEs in technology sectors have access to a dense pipeline of relevant investment opportunities, while SMEs in traditional sectors (textiles, footwear, agri-food) face a shortage of investable startups in their domain.

CMVM data reveals deliberate opacity. Between 2016 and 2023, 14 investment vehicles with CVC characteristics linked to Portuguese non-financial companies were registered, with total committed capital of €87 million. However, conversations with lawyers specializing in venture capital suggest the real number is higher—many companies structure investments through family holdings or SGPS (holding companies) that do not require registration as investment funds. This opacity hampers performance analysis and the sharing of best practices.

The comparison with Spain is instructive. Spain has 89 active CVC funds linked to non-financial companies (Ascri data, 2023), with total capital of €2.1 billion. Adjusted for economic size, Spain has 3.2 times more CVC activity than Portugal. The difference is not explained by average company size—the SME distribution is similar—but by three factors: greater maturity of Spain's independent venture capital ecosystem, specific tax incentives for corporate investment in startups (30% deduction in Corporate Income Tax for investments up to €1 million, not available in Portugal), and a business culture more receptive to investment in intangible assets.

Portugal has an advantage in institutional co-investment. Portugal Ventures, the public fund-of-funds, operates a co-investment program allowing companies to invest alongside institutional funds in Portuguese startups, with Portugal Ventures taking 50% of the ticket. This model reduces risk for companies new to CVC and provides access to professional due diligence. Portugal Ventures data indicates 23 co-investment operations with non-financial companies between 2019 and 2023, with an average company ticket of €380,000. The model is underutilized: only 8% of eligible SMEs are aware of the program (IAPMEI survey 2022).

One final data point deserves attention. The failure rate of first-time CVC funds in Portugal is high. Of the 14 vehicles registered with the CMVM between 2016 and 2020, only 5 completed their first investment cycle and raised a second fund. The remaining 9 were discontinued or remain with uninvested capital. The reported reasons (in off-record conversations with managers) are predictable: lack of quality pipeline, internal conflicts over investment criteria, lack of startup evaluation skills, and unrealistic expectations regarding return horizons. These failures do not invalidate the model—they reflect an expected learning curve—but underline the need for rigorous preparation.

Four Critical Dimensions

The decision to create a dedicated corporate venture capital fund in Portugal involves four structural tensions that do not admit a single solution. Each company must consciously position itself on each dimension, with implications for structure, governance, and return expectations.

Primary Objective: Financial Return versus Access to Innovation

The first tension is between financial return and access to innovation as the primary objective. The literature prescribes clarity, but practice reveals persistent ambiguity. Companies declaring financial return as the primary objective tend to invest in later stages (Series A/B), less risky sectors, and with larger tickets allowing for lower dilution. Companies declaring access to innovation as primary invest earlier (seed, pre-Series A), accept higher risk of total loss, and prioritize sectors adjacent to the core business.

Portuguese evidence suggests an unstable hybrid. Of the five CVC funds that completed their first cycle and raised a second fund, three declare a dual mandate—minimum financial return of 12% IRR and access to innovation in defined areas. This dual mandate creates tension in concrete decisions: invest in a promising startup outside the strategic area? Maintain a position in a startup with weak financial performance but relevant technology? Sell a stake when valuation is attractive but before knowledge transfer is complete?

The most robust resolution observed in the Portuguese market is explicit weighting. An industrial company in the North operating an €8 million fund since 2018 uses a decision matrix with two axes: expected financial return (low/medium/high) and strategic relevance (low/medium/high). Investments in the high-high quadrant (high return, high relevance) are automatically approved up to €500,000. Investments in mixed quadrants require committee approval (CEO, CFO, innovation director). Investments in the low-low quadrant are vetoed. This procedural clarity reduces conflict and speeds up decision-making.

The choice of primary objective has implications for incentive structure. CVC teams remunerated with carry on financial return (traditional venture capital model) make different decisions from teams remunerated with fixed bonuses or linked to strategic objectives. Gompers & Lerner (2000) data shows that funds with carry invest 40% less in radical technologies and 60% more in later stages. In Portugal, only 2 of the 14 registered CVC funds operate with a carry structure—the rest remunerate teams with fixed salary and discretionary bonus. This choice reflects a preference for control and strategic alignment but reduces the ability to attract talent with venture capital experience.

Structure: Dedicated Fund versus Investment Line

The second tension is between creating a legally separate fund (venture capital fund, alternative investment fund) or operating an investment line within the existing structure (holding, SGPS). Each model presents trade-offs in cost, flexibility, and signaling.

A dedicated fund offers three advantages. First, asset separation: investments are isolated from the parent company's operational risk, protecting invested startups in case of financial difficulties at the parent. Second, credibility: startups and co-investors perceive a dedicated fund as a long-term commitment, not an ad hoc experiment. Third, tax incentives: venture capital funds registered with the CMVM access favorable tax regimes (capital gains exemption, under certain conditions). Against these advantages, costs: setting up a venture capital fund in Portugal costs €40-80,000 (legal, CMVM registration, audit), with annual maintenance costs of €25-40,000.

An investment line within a holding offers flexibility and lower cost. The company can invest without creating a separate structure, adjust investment amounts year by year according to cash availability, and avoid regulatory costs. Against these advantages, three disadvantages: lack of asset separation (investments are exposed to company risk), lower credibility with startups (investment can be discontinued without notice), and inability to attract institutional co-investors who require a formal vehicle.

The choice in Portugal correlates with the level of commitment. Companies planning to invest less than €3 million over 3-4 years tend to operate via holding or SGPS. Companies planning to invest €5 million or more tend to create a dedicated fund. The €3-5 million threshold reflects the point where the benefits of a formal structure outweigh the costs.

An intermediate model is emerging: dedicated fund with shared management. The company creates a venture capital fund but hires an external management company for due diligence, monitoring, and reporting, while retaining investment decisions internally. This model combines the credibility of a dedicated fund with access to external expertise. Additional cost: 1.5-2.5% annual management fee on committed capital, plus a 10-20% performance fee on returns above the hurdle rate (typically 8%). Three Portuguese CVC funds operate this model, all linked to family businesses with no prior venture capital experience.

Investment Thesis: Sectoral versus Cross-Sector

The third tension is between a sectoral investment thesis (investing only in startups from a specific sector, typically adjacent to the core business) and a cross-sector thesis (investing in technologies or business models applicable to multiple sectors). Each approach has distinct advantages and risks.

A sectoral thesis offers depth. The company knows the sector's competitive dynamics, can better assess technology and team quality, and can add value to the startup (access to clients, regulatory knowledge, supplier network). Wadhwa et al. (2016) data shows that startups backed by CVCs with a sectoral thesis have 23% higher revenue growth than those backed by CVCs with a cross-sector thesis, attributed to more relevant operational support.

Against this advantage, concentration risk. A company with a narrow sectoral thesis may face a shortage of investment opportunities, especially in Portugal where the startup pipeline in traditional sectors is limited. Startup Portugal data analysis shows that sectors such as textiles, footwear, cork, and agri-food—where Portugal has competitive SMEs—account for only 7% of active tech startups. Companies in these sectors adopting a strict sectoral thesis may go years without finding relevant investment opportunities.

A cross-sector thesis offers diversification and access to a denser pipeline. The company can invest in technologies applicable to multiple sectors—artificial intelligence, automation, cybersecurity, logistics—increasing the likelihood of finding attractive opportunities. Global Corporate Venturing Report 2023 data shows that 64% of European SME CVC funds adopt a cross-sector thesis, compared to 48% of large corporate CVC funds.

Against this advantage, loss of informational edge. Companies investing outside their core sector compete on equal footing with independent venture capital funds, lacking the ability to better assess technology or team quality. More importantly: it reduces the ability to add value to the startup, making the investment purely financial and reducing the likelihood of accessing innovation.

The resolution observed in successful Portuguese CVC funds is an expanded sectoral thesis. The company defines 2-3 adjacent sectors where it has relevant knowledge but does not operate directly, and concentrates investment in those areas. Example: a food distribution company investing in logistics technologies, digital payments, and consumer data analytics—three areas adjacent to the core but not overlapping. This approach maintains informational advantage while broadening the pipeline.

Horizon: Strategic Patience versus Pressure for Return

The fourth tension is temporal. Venture capital requires patience—a typical horizon of 7-10 years between investment and exit (sale or IPO). Portuguese family businesses, used to evaluating investments in 3-5 year cycles, struggle to accept this horizon. The tension intensifies when the company faces short-term pressure—revenue decline, need for core business investment, change of control.

Keil et al. (2008) data shows that 43% of discontinued CVC programs were closed not due to poor performance but because of a change in the parent company's strategic priorities. In Portugal, this pattern is more pronounced: of the 9 CVC funds discontinued between 2016 and 2020, 6 were closed by parent company decision to reallocate capital to the core business, not due to fund performance.

The most robust resolution is irrevocable capital commitment. The company commits a fixed amount (e.g., €5 million) to a fund with a defined duration (e.g., 10 years), and this capital cannot be withdrawn regardless of the parent company's circumstances. This structure—standard in independent venture capital—is rare in Portuguese CVC: only 3 of the 14 registered funds operate with irrevocable capital. The rest allow the parent company to suspend new investments or even redeem uninvested capital.

This flexibility has a cost. Startups and co-investors discount the risk of discontinuation, reducing the valuation they accept or demanding more favorable terms. More importantly: CVC fund management teams with revocable capital face uncertainty about continuity, reducing their ability to attract talent and build market reputation.

An intermediate commitment mechanism observed is phased funding with gates. The company commits capital in tranches (e.g., €2 million initially, plus €3 million conditional) with objective criteria for progression (e.g., investing 80% of the first tranche in 24 months, with realized IRR above -20%). This structure offers protection against catastrophic performance while maintaining credible long-term commitment.

Implications for Decision-Making

The decision to create a dedicated corporate venture capital fund in Portugal is not binary—it allows for intermediate configurations and phasing. Analysis of the four critical dimensions suggests a decision tree with three sequential questions, each eliminating unviable configurations.

First question: does the company have structural excess cash above €5 million that cannot be deployed in the core business at a return above 10-12%? If not, CVC investment does not make sense—the company should focus capital on core operations or return it to shareholders via dividends. The temptation to create a CVC fund with capital that could be applied to the core business at a higher return reflects confusion between innovation and investment. Innovation can be acquired through other means—partnerships, licensing, acquisition of mature companies—without assuming venture capital risk.

If yes, second question: does the company have clarity on its investment thesis—sectors, stages, geography—and the ability to assess opportunities in those areas with greater precision than a generalist investor? If not, the company should consider investing in independent venture capital funds (LP model, limited partner) instead of its own fund. LP investment offers diversification, access to professional due diligence, and reduces adverse selection risk. Cambridge Associates data shows that the top quartile of European venture capital funds generates a median IRR of 18-22%, higher than the median return of CVC funds (8-12%).

If yes, third question: is the company willing to commit capital irrevocably for a 7-10 year horizon, and does it have a governance structure that allows investment decisions independent of short-term pressures? If not, the company should consider an ad hoc co-investment model with institutional funds—investing case-by-case in startups where an institutional fund leads the round, without creating a dedicated vehicle. This model reduces fixed costs and maintains flexibility but limits the ability to build reputation and a proprietary pipeline.

If the answer is yes to all three questions, creating a dedicated fund makes sense. The optimal configuration depends on positioning across the four critical dimensions, but three cross-cutting principles emerge from the evidence.

First, start small and sector-focused. An initial fund of €3-5 million, with an investment thesis concentrated in 2-3 adjacent sectors, allows for learning at controlled cost. Companies launching €10-15 million funds with a cross-sector thesis face the risk of dispersion—too many opportunities, insufficient evaluation skills, inability to add value. Hill & Birkinshaw (2014) data shows that first-generation CVC funds with less than €10 million in capital have a 40% higher survival rate than funds with over €20 million.

Second, invest in capabilities before investing in startups. Companies with no venture capital experience should hire or train a team with expertise in startup evaluation, investment structuring, and portfolio monitoring. The alternative—learning by doing—is costly. Analysis of discontinued Portuguese CVC funds shows that 70% made their first investment within the first 6 months of operation, without a learning period. Result: investments in mediocre startups, unfavorable terms, and rapid disappointment.

The most robust model observed is a zero year of preparation. The company commits capital but does not invest in the first year, using this period for three activities: building the team (hiring a manager with venture capital experience, defining decision processes), building the pipeline (mapping the ecosystem, establishing relationships with accelerators and institutional funds, participating in events), and calibrating criteria (conducting due diligence on 10-15 startups without investing, to test the thesis and refine evaluation). This preparation year has a cost—team salaries, structuring costs—but drastically reduces the risk of error in the first investments.

Third, co-invest systematically. Companies investing alone in startups face adverse selection risk—higher-quality startups prefer institutional funds with networks and reputation. Co-investment with an institutional fund leading the round offers four advantages: access to professional due diligence, external validation of valuation, risk sharing, and access to the lead fund's network. Lerner (1994) data shows that startups co-invested by CVC and institutional funds have a 28% higher survival rate than those invested in by CVC alone.

Portugal offers favorable infrastructure for co-investment. Portugal Ventures operates a program allowing companies to invest alongside in Portuguese startups, with Portugal Ventures taking 50% of the ticket and leading due diligence. Private funds such as Armilar, Indico Capital, and Shilling also accept corporate co-investment on a case-by-case negotiated basis. The cost of co-investment is dilution of upside—the company shares returns with the co-investor—but for a first-generation CVC fund, the risk reduction justifies the cost.

One final implication deserves attention. The decision to create a CVC fund is not reversible without cost. Companies that launch a fund and discontinue after 2-3 years face three costs: loss of reputation in the ecosystem (startups and funds no longer consider the company a credible partner), costs of liquidating holdings at depressed valuations, and opportunity cost of immobilized capital. Keil et al. (2008) data shows that companies discontinuing CVC programs have shareholder returns below the sector average in the three subsequent years, attributed to negative signaling about innovation capacity. Implication: the decision to create a CVC fund should be made with a 10-year horizon and top management commitment—not as an experiment or departmental initiative.

Where the Topic Is Fragile

The evidence on corporate venture capital in SMEs presents four important limitations that should inform decision-making.

First, survivorship bias. Academic literature and consulting reports focus on successful CVC programs—Google Ventures, Intel Capital, Siemens Next47—creating a distorted perception of success rates. Market data suggests that 60-70% of CVC funds are not renewed after the first cycle, but these failures are poorly documented. In Portugal, the absence of public data on discontinued funds prevents rigorous analysis of failure causes.

Second, difficulty in causal attribution. Studies showing a correlation between the presence of a CVC program and superior company performance face the problem of reverse causality: companies launching CVC may be inherently more innovative and better managed, and it is this factor—not CVC—that explains superior performance. Few studies use experimental design or instrumental variables to isolate the causal effect of CVC.

Third, contextual heterogeneity. Most studies focus on listed US tech companies, with characteristics distinct from Portuguese family SMEs: access to abundant capital, liquid labor markets for specialized talent, dense startup ecosystems. Generalizing findings to the Portuguese context requires caution. The scarcity of studies on CVC in European SMEs—and the total absence of studies on Portugal—limits the ability to predict performance.

Fourth, deliberate opacity. Companies operating successful CVC programs have incentives not to disclose information—to avoid pressure from startups seeking investment, to avoid revealing investment theses to competitors, and to protect relationships with invested startups. This opacity creates asymmetry: failures are invisible, successes are over-reported, and the real base rate of success remains unknown.

These limitations do not invalidate the analysis—but underline that the decision to create a CVC fund involves irreducible uncertainty. Companies requiring certainty about return or impact before investing should not create CVC funds. The model suits companies comfortable with disciplined experimentation: limited capital commitment, long horizon, willingness to learn from mistakes, and clear discontinuation criteria if results after 3-4 years are systematically negative.

Open Questions

Research on corporate venture capital in SMEs remains nascent, with four questions deserving attention from academics and practitioners.

First, what is the optimal governance configuration for SME CVC funds? The literature prescribes organizational separation and decision autonomy, but empirical evidence is scarce. Specific questions: ideal composition of the investment committee (internal only, mix of internal and external, external majority?), frequency of reporting to top management, veto criteria for investments by the CEO or board. Disciplined experimentation by Portuguese companies—with rigorous documentation of decisions and results—can generate valuable knowledge.

Second, how to measure the strategic impact of CVC independently of financial return? Studies use proxies such as the number of patents or product launches, but these metrics capture only part of the value. Transfer of tacit knowledge, access to talent networks, signaling innovation capacity—all generate value but are difficult to quantify. Developing an evaluation framework capturing these intangible benefits is an important gap.

Third, what is the role of CVC in SME M&A strategies? CVC investment can serve as extended due diligence before acquisition—the company invests in a startup, observes performance for 2-3 years, and acquires if validation is positive. This logic is common in large corporations but little studied in SMEs. Specific question: do startups invested in by SME CVCs have higher or lower acquisition valuations than non-invested startups, controlling for performance?

Fourth, how to structure incentives for SME CVC fund management teams? The carry model used in independent venture capital may not be appropriate when the primary objective is strategic, not financial. But the absence of financial incentives reduces the ability to attract talent. Experimentation with hybrid models—carry on financial return plus bonuses for strategic objectives—may reveal superior configurations.

These questions have no definitive answers—but companies that address them in a disciplined way, document choices and results, and share lessons learned (even anonymized) contribute to the maturation of practice in Portugal. The absence of public data on Portuguese CVC is a gap that could be filled by business associations or research institutions willing to aggregate information confidentially.

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On corporate finance in SMEs: MACRO develops corporate finance mandates that include structuring investment vehicles, due diligence of CVC opportunities, and startup valuation for co-investment. The work combines financial modeling with strategic fit analysis, supporting investment decisions in external innovation. For companies considering creating their own fund, we offer a readiness assessment that evaluates the four critical dimensions presented in this article and recommends the optimal configuration or lower-risk alternatives.