Written by Sabine VanderLinden: Editorial on corporate innovation & venture client partnerships

The Venture Client Promise – and the Reality Check 

Corporate innovation leaders have embraced the venture client model as a bold way to inject startup innovation into their organizations. Instead of just investing in startups, companies become their client – giving startups business and revenue while solving corporate problems. In theory, it's a win-win formula for high-velocity innovation. In practice, however, many venture client initiatives are stalling or failing to scale. Often, friction arises from an organizational structure that is not optimized for agility and from internal processes that slow down execution and decision-making.

At a recent gathering of minds hosted by the fantastic team at the ERGO's ScaleHub, corporate innovation heads, business development managers, startup founders, and insurance participants candidly aired the gaps in today's venture client model. From slow-moving governance to lukewarm business unit buy-in, these leaders did not hold back.

“My pain point is integration into corporate processes versus speed,” admitted one participant from a regulated company. That blunt statement captures a common frustration: startups move fast, corporations move deliberately, and when they collide, innovation can grind to a halt.

This editorial draws on the frank insights from recent discussions, including direct quotes from the front lines, to explore the significant gaps undermining venture client programs. More importantly, we’ll highlight actionable guidance on how to bridge these gaps and build best-in-class venture client relationships. To ensure startups' commercial engagements deliver actual strategic value, it is essential to have a clear VCM strategy and maintain a strong strategic focus that aligns with corporate objectives. Successful venture client teams typically have dedicated strategic, business development and tech talent. They also have clear goals linked to the corporate and business strategies, enhancing their effectiveness.

Spoiler: It’s not easy – cultural inertia, systemic barriers, and plain old fear-of-change are formidable foes. But as our discussions showed, bold leaders are finding ways to overcome them. They’re streamlining governance, rallying internal champions, and rethinking how corporates engage with startups. If you’re involved in corporate-startup partnerships, it’s time to take a hard look in the mirror. Let’s dive into the key challenges and how to fix them.

Integration vs. Governance: Speed Bumps on the Road to Innovation

Every corporate-startup pilot starts with high hopes – until the corporate “immune system” kicks in. Complex procurement rules, lengthy security reviews, legal checkpoints: the very processes meant to protect a big company can smother a nimble startup initiative. This came up again and again. As one innovation manager put it, “Today, one topic will be how do you navigate through your governance processes? This is a headache, I can tell you. I hate it.” He went on to describe the “governance jungle” of procurement, legal, data protection, and compliance checks that even a $20k pilot must slog through. Complex internal processes can further hinder innovation by slowing decision-making and making it challenging to seize high-value opportunities quickly.

The tension between speed and compliance is real – especially in regulated industries. Integration into legacy systems can’t happen without jumping through governance hoops.

“We’re…regulated and I know a lot of the pains that comes with it,” said one participant from a financial firm.

The Integration vs. Governance Gap

Venture client units are tasked with moving at startup speed, but corporate governance isn’t built for agility. The result is often a stalemate: startups frustrated by delays, business units seeing momentum fizzle, and innovation teams caught in the middle.

How To Fix It

Bold organizations are rethinking their approach to governance for innovation projects. Some best practices that emerged:

• Create a fast-track for pilots: Develop a “light” procurement and IT security process for experiments below a certain cost or data risk threshold. For example, pre-approve a sandbox environment where startups can safely connect to test data with minimal bureaucracy. I have met two AI data-sharing security and encryption tech enablers recently which can just facilitate that.

• Embed compliance early: Involve legal, procurement, and IT security colleagues from the outset as partners. If they help design the pilot process, they’re more likely to support flexible interpretations and creative solutions. As one attendee noted, having internal “bridge builders” on the team – people who speak both startup and corporate language – is critical to navigate the governance maze. Leveraging cross functional teams that include R&D, marketing, and finance can further help navigate governance challenges and ensure alignment across departments.

• Secure executive air cover: High-level sponsorship can override unnecessary red tape. In one striking example, an energy company even worked with regulators to change the law so they could contract startups faster – allowing a one-year pilot and then a multi-year engagement without a full tender process. That’s an extreme case, but it underscores the point: leadership must be willing to challenge internal policies when they hinder innovation. Senior executives play a crucial role in providing oversight, establishing committees, and accelerating decision-making to ensure CVC activities align with company objectives.

The Bottom Line: Speed and Governance

Speed and governance will always be in tension, but they must be balanced. Venture client leaders should proactively streamline procedures wherever possible, while educating startups on corporate realities where not. By tackling the integration/governance gap head-on – with pre-approved pilot frameworks, cross-functional “fixer” teams, and C-suite support – companies can remove those speed bumps on the road to innovation.

Securing Business Units' Buy-In: From Pilot Excitement to Lasting Commitment

Another central theme I noticed was the struggle to get and keep business unit (BU) engagement in venture client projects. It's one thing to run a cool pilot with a startup; it's another to have the business lines truly invest their time, budget, and trust in scaling that solution. “Ensuring sustainable commitment by the business units is really hard when they are "novice" when accepting enabling techs within their operations. I think the process can be quite lengthy. Then, keeping them engaged can be difficult sometimes,” confessed one corporate venture leader. Others nodded in agreement – BU stakeholders often start enthusiastic, but as a pilot drags on or hits snags, their attention wanders back to urgent core business tasks.

This is a critical gap: without genuine business unit buy-in, even the most promising startup collaborations will stall after the pilot. The roundtable participants highlighted issues like BU managers who view the startup project as an “innovation team experiment” rather than their solution, or middle managers who fear new tech might disrupt their domain. A railway innovation hub attendee joked that many professionals spend half their time on internal communications – essentially marketing the venture client program inside the company – because “to convince stakeholders all over the corporation, we must sell venture client internally.” It's a real challenge to turn pilots into production if the internal customer, the internal end user, isn't entirely on board. Successful integration of portfolio companies into the business requires alignment with the corporation's strategic objectives, ensuring that investments and collaborations support long-term goals and deliver measurable value.

The Business Unit Buy-in Gap

Business units treat startup collaborations as side projects, resulting in pilots that don't translate to rollouts. Lack of BU ownership, unclear KPIs aligned to the business, and perceptions of “innovation theater” all undermine the venture client effort.

How To Fix It

The consensus was that early and constant alignment with the business unit is non-negotiable. Some guidance points:

• Co-create the use case: Venture client teams should act as facilitators, not solution dumpers. That means working with the BU from day one to define the problem and success metrics. When a BU feels the pain point and helps pick the startup, they’re more invested in the outcome. “Our issue usually is that the business units have a lot of ideas… but they always think solutions,” said one participant, noting the need to refocus BUs on articulating the problem first. Helping internal clients define the real problem ensures the startup’s solution truly matters to them. Valuable insights from previous collaborations with portfolio companies can inform future projects and improve outcomes.

• Assign “bridge builders” and champions: I recall a highly effective description from Bessem Ayari, Head of Innovation and Scouting at ERGO Group, categorizing those venture client roles into Treasure Hunters, Bridge Builders, and Pathfinders. The bridge builder role is especially crucial for BU buy-in. These are team members who embed with the business, speak their language, and keep the project aligned to BU needs. They literally build the bridge between the startup and the corporate client. In practice, that might be a product manager or innovation coach jointly appointed by the innovation unit and the business line.

• Tie innovation to BU KPIs: If a startup pilot can be connected to a BU leader’s objectives (cost savings, revenue growth, risk avoidance, customer experience), it moves from “nice experiment” to “strategic priority.” One insurance executive shared how they work out the business case early, during the pilot, because “scaling happens only with a business case,” and many business units need help calculating the impact. By developing the business case in parallel, you give the BU a concrete reason to care and a way to justify resources if the pilot succeeds.

• Maintain engagement through the valley of death: Pilots often have a period of ambiguity where results are pending. Keep the BU engaged with regular check-ins, quick wins, and by sharing any positive early data or user feedback. Celebrate incremental milestones with the team. As one colleague noted, it’s about “keeping them engaged” during the long slog. The venture client team should act as cheerleaders and taskmasters – reminding everyone why they embarked on this in the first place.

Bottom line: From Pilot to Solution

To convert a pilot into a scaled solution, the internal client must truly want it. Venture client units cannot “throw a startup over the wall” at a business unit and hope for the best. They must cultivate BU buy-in through co-ownership, clear business value, and constant communication. The payoff is huge: when a business unit genuinely embraces a startup solution, the chances of scaling across the enterprise skyrocket.

Lead Generation: Finding the Right Startups (and Problems) in a Crowded Landscape

Before you can run pilots, you need to find the right startups – or sometimes, find the right internal problems for startups to solve. Lead generation in venture clienting goes both ways: sourcing promising startups externally and uncovering worthwhile challenges internally. This activity still suffers from a significant gap in many institutions. One expert highlighted, “Lead generation is a vital task for every one of us. The best way to address the problem is to understand the challenges… the two approaches for lead generation, 'push and pull', and then dive into what works best.” In other words, how do we generate quality leads for venture client projects and do it efficiently? We agreed that engaging with the broader startup ecosystem and establishing a presence in key innovation hubs is essential for identifying and connecting with target startups that align with the corporation's strategic goals. CVC allows corporations to gain early access to cutting-edge technologies by investing in startups. The VCM must allow corporations to gain early access to cutting-edge technologies by utilising them within vital operational processes.

The Push vs. Pull Gap

Many venture client units struggle either with too many inbound startup pitches (signal vs noise problem) or too few internal problem statements from business units (ideas drying up). In some cases, innovation teams rely on a “push” model – scouting the world for cool startups and then pushing them to business units, which can result in solutions looking for a problem. Conversely, a pure “pull” model – waiting for business units to request solutions – can stall if BUs aren’t actively engaged or aware of what’s possible. Finding the sweet spot is tricky.

During the discussions, one corporate rep asked bluntly: “What are the best methods you use to do lead generation? Is it push or pull? What’s your conversion rate?” Clearly, teams are seeking a playbook for this.

Another insight was that format matters – whether it’s open innovation challenges, startup demo days, hackathons, or internal ideation workshops, each method has pros and cons. And it’s not just about the quantity of leads, but quality, so corporations must adapt what they are truly measuring: the goal is to surface relevant startups that address genuine business needs.

How To Fix It

While there’s no one-size-fits-all, a few best practices emerged:

• Hybrid push–pull approach: The consensus was to combine both models. Encourage business units to articulate problems proactively (pull), and maintain an active scouting function (push) to bring new tech opportunities to the company. A few Venture Client managers admitted that their venture client unit ran regular "pain point" collection exercises with BUs, while also keeping tabs on startup trends in their industry. The magic happens when a scouted startup aligns with an internal pain point. You need both sides primed.

• Use challenges and calls: Several workshop participants mentioned success with innovation challenge programs or accelerators targeted at specific domains. For example, an oil & gas company described how they posed a specific challenge online and let startups apply competitively to the challenge, resulting in a strong match to future pilots, despite regulatory changes. A well-framed problem statement can be a beacon that attracts top startups (“pull-in” model). Just be sure you have the BU’s buy-in on the challenge and a commitment to support the winner.

• Leverage networks and platforms: Don’t reinvent the wheel – tap into startup databases, VC networks, strategic international startup events, and industry partnerships to source leads. Some venture client teams partner with venture capital firms or startup hubs to get curated introductions. However, remember warnings from one Silicon Valley expert: many VCs warn their startups about working with corporates if it might slow them down. We’ll discuss this more under Adverse Selection, but the takeaway for lead gen is to ensure your corporation is seen as a trusted, attractive client to the startup community. Your reputation matters when sourcing the best startups. Corporations can further incentivize startups by offering valuable market insights and access to established distribution networks, helping startups navigate industry trends and accelerate their market entry.

• Nurture internal idea flows: On the internal side, make it easy for any employee or BU to submit problem ideas year-round – via an idea portal, hackathon, or even an informal “innovation coffee chat.” And crucially, close the feedback loop. If someone submits a problem or scouts a startup, let them know what happened next. This keeps people motivated to continue contributing leads, creating a sustainable pipeline of opportunities.

Bottom line: Structure Your Lead Generation Process

Great venture client projects start with excellent leads. Invest in a structured lead generation process that blends internal pull with external push. Curate quality over quantity – one well-aligned startup that solves a real, pain-point trumps ten random tech demos. As one participant framed it, venture client units need to think like sales teams: fill the funnel, qualify leads, and always know your “conversion rate” from lead to pilot to scale. With a strong pipeline in place, you're setting the stage for success – and reducing reliance on serendipity.

From Pilot to Scale: The Startup Scaling Challenge

If there was one thing everyone agreed on, it’s this: a pilot is only a beginning. The accurate measure of venture client success is scaling a startup solution across the organization, turning a one-off experiment into broad business value. And yet, scaling is where many programs stumble. “Trying to scale a solution that we brought into one unit to others…” was voiced as a common struggle. A pilot might work in one department or country, but then hits a wall. Perhaps other units aren’t aware of it, or local systems can't integrate, or the startup can't support a larger deployment. As one insurance innovator quipped, “It’s not like pressing a button, and it's rolled out in 24 countries. Every country has its own systems, its own regulations, its own culture… we need to kick down doors sometimes.” Focusing on scaling sustainable solutions that support long-term growth is essential for organizations aiming to achieve ongoing innovation and strategic advantage.

The Startup Scaling Gap

Organizations lack a clear pathway for scaling successful pilots. Too often, there’s a “hands off the wheel” moment after a pilot, where innovation teams move on to the next shiny thing, and the pilot owner in the BU (if there is one) struggles to rally resources for rollout. Additionally, startups may not be ready to scale – they might lack enterprise features, need funding to grow delivery capability, or hit technical hurdles when going from demo to production volume.

Experienced venture client managers shared war stories of pilots that languished. One participant from the automotive sector mentioned they had done 250+ pilots, and the burning question remains: “What can we do to select the most promising startups and support them in the transfer from follow-up projects to scaling?” In other words, how do we not let the good ones slip through the cracks? Another venture client manager asked how to ensure knowledge from failed pilots is shared, so that lessons are learned and future efforts improve. Scaling isn’t just about technology – it’s about organizational learning. Failure rates in startup investments generally hover around 80%-90%, highlighting the need for strategic investment portfolios, too, from investors to sustain longer-term projects.

How To Fix It

Several best practices for crossing the pilot-to-production chasm came out:

• Plan for scale from day one: This mantra was echoed by many. Don’t undertake a pilot without envisioning what happens if it succeeds. Have the business case drafted and a high-level rollout plan ready before the pilot concludes. For example, if a startup solution proves its value in one factory or store, where will the next deployments be? What budget or approvals will be needed? Identifying these early with the BU increases the odds that a successful pilot immediately transitions to a phase 2 rollout, rather than dying in PowerPoint.

• Dedicate “scale teams” or resources: One company described assigning a special team, those “bridge builders” again, whose job is to take a validated pilot and replicate it elsewhere. “We started with one business unit, and now the question is, where else can we scale? … There are so many countries… we are the bridge builders here as well,” said an innovation lead. By giving a team the mandate (and budget) to scale, you avoid overburdening the initial pilot team and signal organizational commitment to the startup. This might involve a central deployment fund or a playbook for onboarding new business units to the solution.

• Strengthen the startup for enterprise: Corporations can actively help the startup get ready for scale. This might mean providing architectural guidance, connecting the startup to system integrators, or even investing capital. However, be cautious: don't force the startup into premature customization that only suits your company. One external expert warned that big companies often push startups to tailor so much, they stunt the startup's broader growth – a lose-lose scenario. “VCs tell their startups don’t work with corporates because they're just going to try to over-customize… and slow you down,” he noted. The best corporate partners strike a balance: help the startup meet enterprise standards (security, privacy, governance, scalability) without demanding one-off features that make the product unsellable elsewhere.

• Share successes (and failures): Make internal case studies of both pilot wins and pilot flops. One automotive participant stated, "share learnings from unsuccessful PoCs, not just the successes." This is crucial for scaling because it educates other teams on what pitfalls to avoid and where a solution might or might not fit. Celebrate the wins publicly – send out that internal newsflash when a pilot graduates to full deployment, crediting the BU and venture client team. Storytelling internally (backed by KPI results) helps generate momentum for the next scale-up. As was discussed, effective internal communication and even a bit of evangelism are key to selling the value of venture clienting within the company. Continuous learning from both successes and failures is key to achieving investment success and strategic growth, ensuring that each pilot contributes to the company’s long-term objectives.

Bottom line: The Scale Chasm

A venture client pilot is not an end – it's Table Stakes. To realize true ROI, you need to cross the scale chasm. Be intentional in selecting pilots with high potential and commit the necessary support to expand them. In venture capital, investors talk about “follow-on” investments for the winners; similarly, corporates must double down on pilot winners through funding, resources, and leadership attention. If you're not prepared to scale it, don’t pilot it in the first place. By institutionalizing this mindset, you ensure venture client efforts translate into tangible business outcomes across the enterprise.

Budgeting and Resource Allocation: Funding the Innovation Engine for Corporate Strategy

Money matters – even for those "tiny" startup pilot projects. Several discussion contributors voiced concerns about budgeting for venture client units and pilots. One delegate highlighted it directly: “My pain point is budgeting venture clients. So, I’m building a financial backbone for resource allocation and budgeting,” she explained. This underscores a common gap: many organizations lack a clear financial model for how venture client activities are funded, how costs are shared with business units, and how to budget for scaling successful solutions.

The Dedicated Budget Gap

Without dedicated funding, venture client programs often scrape together resources or rely on business units to pay for pilots out of their own budgets. This can lead to delays (“you now have to wait until next quarter's budget”) or conflicts (“who pays for the cloud costs of this pilot?"). It also makes it hard to plan a portfolio of experiments if each one requires ad-hoc funding approval. On the flip side, if the innovation team has its own budget, there's a risk that BUs aren't financially invested and thus less committed. Striking the right budgeting balance is tricky.

Key pain points mentioned included: difficulty in quantifying the ROI of venture client projects upfront (hence hard to justify budget), deciding whether the venture client unit is a cost center, profit center, or just a “strategic expense”, and how to handle equity or success fees if a startup becomes a big vendor later (less common, but raised conceptually). Essentially, the financial governance of venture clienting is still evolving in most companies. In addition to the challenge of quantifying ROI, it is important to track financial returns and financial metrics such as ROI, IRR, and exit multiples to justify investment and measure the success of these initiatives.

How To Fix It

While finance wasn't the sexiest topic of the day, it’s an essential one. Guidance from the trenches:

• Establish a clear venture client budget (with C-suite sponsorship): Many companies are now creating a central innovation fund specifically for pilot projects. For instance, the venture client unit might have an annual budget to cover, say, 10–15 pilots at $50K-$100K each. This removes the first hurdle of “who pays for the pilot.” The business unit contributes in-kind resources (people, time), but the central fund de-risks the cost. If a pilot graduates to implementation, then the BU takes over funding (often with help from IT or corporate). Having a financial backbone like this – essentially a pre-approved pool of money – was recommended to accelerate experimentation.

• Co-fund for co-ownership: To ensure BUs have skin in the game, some firms use a co-funding model – e.g., the central fund covers 50% of pilot costs, the BU covers 50%. This forces the BU to value the project enough to invest, but still lowers the barrier with central support. One participant noted that if BUs “don't even know how to calculate a business case” for a startup project, the venture client team can assist. This help can include quantifying potential value, which in turn justifies the BU’s budget contribution. Evaluating a startup’s revenue streams and leveraging the corporation's extensive resources, such as R&D, marketing, and distribution networks, can further enhance the value and scalability of these collaborations.

• Treat it as an options portfolio: Communicate to finance and leadership that venture client pilots are like options or experiments – most will be small investments, a few will pay off big. This is akin to a VC portfolio approach. Set expectations that, say, 70% of pilots might not scale, 20% will scale modestly, and 10% could be game-changers. The budget should be seen in aggregate, not judged solely on a pilot-by-pilot basis. Framing pilots as the R&D expense of business innovation helps shift the mindset from cost to investment.

• Streamline procurement for pilots: Budgeting isn’t just about money; it’s also about how money is spent. Ensure procurement policies allow quick engagement with startups (e.g., use a credit card or simple PO for small pilot fees, rather than lengthy vendor onboarding for a $25K pilot). One insurance participant confirmed that even a $30K pilot had to go through third-party risk management and other checks, which can indirectly inflate the “cost” in time and effort. Pushing for a simplified contracting template for startups can greatly reduce the friction and hidden costs of each engagement. Time is money, after all. Flexible equity stakes should also be considered part of the partnership structure when budgeting for pilots, allowing terms to evolve as business needs and strategic priorities change.

Bottom line: Gain Budget Clarity

Lack of budget clarity can starve a venture client program before it ever takes off. By securing explicit funding (and smart funding models) upfront, you give your team runway to experiment and signal internally that “the company is investing in this, so you should too.” As always, strong support from the C-suite – ideally the CFO alongside the Chief Innovation Officer – makes a world of difference. Mark Klein, Chief Digital Officer of the ERGO Group, confirmed that digital transformation requires commitment of resources and clear targets over multi-year cycles. The same applies here: treat venture client initiatives as a strategic investment, resource them accordingly, and watch the innovation engine hum.

The Adverse Selection Trap: Attracting the Best Portfolio Companies (Not Just the Available Ones)

Perhaps the most thought-provoking insight of my conversations came from an outside perspective (a Silicon Valley veteran) who issued a friendly warning: Beware of adverse selection in your startup partnerships. In plain terms, if your corporation is too slow, too demanding, or not offering enough value, the most promising startups will simply opt out, and you’ll be left with fewer options. He explained that top-tier startups often avoid corporate deals that might lock them into a single client or require heavy customization, because it distracts from scaling to a broader market. “It's a real thing in Silicon Valley that VCs tell their startups don’t work with corporates, because they're just going to try to over-customize… and they're going to slow you down,” the VC shared. Venture capitalists actively discourage their star companies from getting entangled in cumbersome corporate projects. Startups with a strong track record and expertise in emerging technologies are especially selective, seeking partners who can help them scale innovative solutions and access new opportunities.

The result? If your venture client program is notorious for bureaucracy or one-sided terms, the startups that agree to work with you may be second-tier. “Would Mark Zuckerberg have done a deal with a big corporation like yours? Probably not,” he quipped. “The people that are going to win have got this worked out nicely… You've got to have adverse selection. The ones that agree to poor commercial pilot terms are not likely to be the killers.” In other words, the best startups have options and will steer clear, leaving you with those who have fewer choices (and perhaps inferior tech).

This point hit home for many in the room – it is the elephant in the venture client's living room. Adverse selection can silently undermine the whole premise of corporate-startup commercialization and adoption. You might chalk up a steady stream of pilots, but none of them turn out to be category-leading solutions, because the true top-performers never engage. You have to hunt for them.

How To Fix It

The message was clear: Corporates must make themselves attractive partners if they want to work with the best startups. As the VC puts it emphatically, “You really do need to do everything you can to overcome adverse selection… that is the number one reason I see corporate venture or venture clienting programs fail.”

Here are some ways to do that:

• Offer speed and agility: We’ve addressed governance and decision-making speed earlier – this is precisely where it matters for attracting startups. If you can complete a pilot project in 3 months (not 12) and give a startup a go/no-go on scaling in a reasonable timeframe, word gets around. Speed is a competitive advantage in courting top innovators.

• Be customer, not just evaluator: Too often, corporates treat pilots as if they’re doing the startup a favor, subjecting them to endless tests and hoops. To a great startup, a venture client pilot should feel like a genuine customer relationship – i.e., you’re using their product to solve a real problem, and if it works, you’ll buy more. Avoid treating it like a science fair project. One startup founder at the event appreciated that a particular venture client engagement came with a one-year committed contract if they won the challenge, meaning the corporation put skin in the game. That kind of seriousness will attract better applicants than a vague “let's pilot and see.”

• Don’t over-negotiate IP or equity: Some corporates scare off startups by demanding onerous terms – e.g., ownership of any IP developed, or equity/warrants as part of the deal. Unless your industry requires it (or you’re paying a lot for it), keep pilot contracts simple and fair. The goal is to build trust. Remember, you want the startup to succeed in general, not just build you a custom toy. If they smell that you’re trying to “own” them or restrict their future, the best ones will walk away.

• Leverage your strengths (beyond money): To get top startups interested, highlight the non-monetary value you bring – access to scale, industry expertise, a sandbox to hone their product, a marquee logo reference, etc. Another venture client expert advised, “recognize the fact that the ecosystem needs you to succeed.” Corporates have assets startups need; the key is positioning your venture client program as a gateway to those assets without stifling the startup. Be the partner that helps a startup accelerate, not slow down. For example, some companies have used their global networks to introduce a startup to new customers in other regions as part of the collaboration – a win-win that entices top startups to work with them. Additionally, offering early access to cutting-edge technologies and supporting new business models can make your corporation a strategic success for startups, helping both parties stay ahead of the competition, facilitate financial impact, fulfill corporate goals and drive innovation.

Bottom line: Eliminate Adverse Selection

Adverse selection is a silent killer of corporate innovation efforts. You might never know that the reason your pilots underwhelm is because the true high-flyers didn’t want to engage. The antidote is self-awareness and a startup-friendly approach. Ask yourself: Would I, as a hot startup, be excited to work with our company? If the honest answer is no, due to slow processes, unclear outcomes, or control-heavy terms, then change those conditions. The venture client units that thrive are the ones that become the "partner of choice” for startups in their domain. They build a reputation in the ecosystem for fairness, speed, and adding value. And that lets them access the top-tier innovations that can truly transform the business.

Cultural Inertia: The Human Side of the Equation

Underpinning all these gaps – governance, buy-in, lead gen, scaling, budgeting, and startup appeal – is an even more fundamental challenge: corporate culture and mindset. As one executive noted, “Digitalization always comes with a lot of effort, cultural change, but also investments… You will always have the discussion with other groups in the company: Why should I invest in that and not in my core business?” This hits at the heart of cultural inertia. People resist change; business units protect their turf; management focuses on short-term targets. Collaborating with disruptive outsiders (startups) is inherently threatening to many status quos.

Without a culture shift, even the best venture client processes will falter. The culture must celebrate innovation, tolerate failure, and encourage cross-pollination of ideas. It needs top-down and bottom-up support. One participant remarked that what was “outstanding” in their case was having board-level involvement from day one, which sent a powerful message to the whole company. A well-defined organizational structure and a dedicated CVC team can help drive this change by ensuring clear roles, effective decision-making, and alignment with strategic goals.

“If you want to transform and change, you have to make it a topic for the whole company, not only for the digitalization folks,” said Mark Klein, ERGO’s Chief Digital Officer.

In other words, venture clienting can’t be a fringe activity by the innovation team – it must be part of the company’s core mission and values.

How To Fix It

Changing culture is the long game, but here are some strategies to start nudging it in the right direction:

• Lead by example (and story): When senior leaders visibly champion startup collaborations – mentioning them in earnings calls, visiting the startup teams, celebrating wins – it legitimizes the effort company-wide. Equally powerful are stories of impact: circulate anecdotes of how a startup solution saved the day, or how partnering with a startup taught the team a new way of working. Humans respond to stories more than metrics. Use narrative to fight inertia. C-suite executives play a crucial role here, providing strategic guidance and championing corporate venturing initiatives to ensure alignment with long-term goals.

• Train and reward the “innovation heroes”: Identify and empower those within business units who are excited about working with startups. Give them recognition – titles like “Innovation Catalyst” or simple rewards for taking on pilot projects in addition to their day job. When others see peers being celebrated for venturing beyond the status quo, it chips away at the skepticism. Conversely, ensure that failure in a pilot is not punished. If a BU lead takes a risk on a startup and it doesn’t pan out, thank them for trying and extract the learning. Nothing kills culture faster than a public flogging of an innovation attempt.

• Integrate into strategy: Make venture clienting (or open innovation broadly) a pillar of the company’s strategy. When it's in the CEO’s agenda and the board asks the business units “what startups are you working with this quarter?”, you’ll be amazed how quickly people pay attention. One company set a goal for each division to integrate at least two external startup solutions per year – a target that made innovation part of the performance conversation. This could mean 10 to 20 ventures per year. As Mark Klein mentioned about digital goals, stretch goals can drive focus, creating a sense of urgency beyond business-as-usual.

• Cross-pollinate teams: Cultural inertia often stems from siloed thinking. Try secondments – have your venture client team members spend a few months in a business unit and vice versa. Hire some startup folks to join your corporate (even temporarily as entrepreneurs-in-residence). These exchanges humanize the “strange startup people” to the corporate crowd and vice versa, building empathy and breaking down the us vs. them mentality.

Bottom line: Double Down on Culture Change

Culture change is hard, period. But it’s the soil in which your venture client seeds are planted. If the soil is hostile, nothing will grow. By actively shaping a curious, risk-tolerant, and externally oriented culture, you create an environment where venture client partnerships can flourish. And remember, culture change starts with leadership and with grassroots ambassadors – nurture both.

A Call to Action for Venture Client Leaders and C-Suite Sponsors

Discussion on the State of the Venture Client Model surfaced hard truths and hopeful stories in equal measure. Yes, there are systemic barriers and gaps in the current model, but none are insurmountable.

Dozens of corporates, startups, and insurers were comfortable coming together and sharing openly their experiences, a sign that the will to improve is strong. Now, it's about translating insight into action. A well-structured Venture Clienting program can help the parent company and its Venture Clienting unit adapt to new business models and transform traditional industries by leveraging startup innovation and disruptive approaches. These are similar to the premises on which CVC programs were built.

For those leading venture client units, it's time to double down on execution. To tackle that governance bottleneck you've been tolerating, convene the legal/procurement heads and hammer out a leaner process.

If business unit engagement is lacking, march into your BU leader’s office and ask what it will take to make this their priority. Get your financial house in order – build that budgeting backbone so you can say “yes” to a great pilot opportunity without scrambling.

And perhaps most importantly, hold a mirror up to your program and ask: Are we a startup’s dream client or a nightmare? Then do everything in your power to become the former.

As our Silicon Valley friend urged, “Cast a wider net… be somewhere that startups want to work with. " The ecosystem needs you to succeed, and you need the ecosystem. Monitoring global trends and market changes is essential to effectively managing startup collaborations and maintaining a competitive edge in this rapidly evolving landscape.

For C-suite sponsors and would-be sponsors: Your role is pivotal. With your backing, venture client initiatives can break corporate inertia and transform the company.

With the ERGO ScaleHub, Companies like the ERGO Group aim to change this mindset within the insurance sector. 

Without it, they will remain side projects. So, make startup collaboration a boardroom topic. Ask your teams where they're leveraging external innovation and how you can help remove barriers. Be willing to take calculated risks – perhaps funding a portfolio of pilots, or fast-tracking one promising startup deployment even if all the ROI data isn’t in yet. Set bold innovation goals that force the organization to pay attention. And don't forget to celebrate the folks on the ground doing this work – they are your agents of change in a high-velocity world.

Ultimately, venture clients are about rethinking value creation. They recognize that not all the best ideas in the world will come from inside your four walls—and that's okay because you can bring them inside through smart partnerships. They are about marrying the strengths of a large enterprise (scale, resources, market access) with the strengths of startups (speed, creativity, disruptive tech).

When it works, it's incredibly powerful. One speaker passionately told us, “I believe this is your time… Think bigger and take real risks. This is going to happen whether you guys are involved or not. So why not be involved and have your company lead the change?”

The call to action is clear...

Venture client units and their executive sponsors must step up and be bold. Tear down the barriers, bridge the cultural divides, and relentlessly focus on making your startup collaborations faster, smoother, and more impactful. The innovation clock is ticking faster than ever – those who master the venture client model will ride the wave of change, and those who don't will be left behind. Now is the moment to rethink, regroup, and relaunch your approach to corporate venture commercialisation. Your future competitive edge might just depend on it.

We have shaped the Venture Client blueprints for the Zurich Innovation Championship and ERGO ScaleHub.

We are experts in emerging risks affecting finance and insurance. So, if you want to lead in the Venture Client world.... Just talk to us.