Does it matter where the money comes from? Absolutely. There is “good” and “bad” money, and it’s essential for corporate innovators to know the difference.
The reason is the type of capital used to fund a venture fundamental represents the early choices that will define investor expectations. These expectations will determine the types of markets and channels that venture can or cannot target.
Biggest problem with corporate capitalists is they often push ventures to go after very large markets. Venture capitalists, on the other hand, understand how even the smallest markets growing very quickly can emerge as huge markets in less than a decade.
Clayton Christensen said the best money for corporate venturing is patient for growth but impatient for profit. Then, later when winning strategy has emerged, money should be impatient for growth.
Bad money for corporate innovation is impatient for growth but patient for profits. The best time for corporate innovation is when core business is still growing. This provides cover for new innovation that does not fall into the big market problem.
