Citi Ventures Head on Corporate Venture Capital
Insights from Citi Ventures: Navigating Corporate Venture Capital
During our recent Early Stage event, a comprehensive conversation was held with Arvind Purushotham, the managing director and global head of Citi Ventures. The discussion centered on how startups should approach corporate venture arms, detailing the implications of receiving investment from an enterprise such as Citi, and strategies for effectively utilizing such a substantial partnership.
For founders seeking to weigh the advantages and potential drawbacks of collaborating with a corporate venture arm compared to a traditional venture capital firm, this analysis provides valuable perspectives.
Evolving Corporate Investment Strategies
Purushotham highlighted the significant changes corporates have implemented in their operational approaches in recent years, largely driven by competitive pressures. He noted that increased speed has become paramount for maintaining a competitive edge.
Despite the inherent complexities of large organizations – including established risk, compliance protocols, and senior management oversight – Citi has successfully navigated these challenges to accelerate its investment processes. He affirmed that these internal systems haven’t generally hindered their ability to move quickly.
As Purushotham explained, “We haven’t encountered situations requiring subsequent closing rounds or necessitating companies to pursue additional funding tranches. We’ve consistently finalized investments concurrently with the rest of the investment syndicate.”
While occasional requests for extended timelines may arise, he emphasized the importance of a well-designed process that accommodates the rapid pace of venture capital activity. This approach appears to be yielding positive results, with this year marking the firm’s most active period to date.
“We’ve completed 25 investments in the first half of the year, with 14 representing new ventures,” he stated. (Timestamp 3:32)
Leveraging the Citi Network and Alignment of Interests
The conversation extended to the types of introductions founders can anticipate from Citi Ventures, both within the bank’s various departments and externally. (Timestamp: 12:43)
A key consideration for founders is the compensation structure of Citi Ventures partners, ensuring their venture backers have a vested interest in the success of the portfolio companies – often referred to as “skin in the game.” This topic was also explored. (Timestamp: 16:13)
Investment Focus and Competitive Considerations
The discussion also addressed Citi Ventures’ sensitivity to pricing in investment deals (Timestamp: 37:23), as well as its investment interests beyond the fintech sector. Notably, the firm is increasingly active in proptech investments. (timestamp: 25:06)
A common concern for startups is whether partnering with a major financial institution like Citi could preclude collaborations with its competitors. Purushotham addressed this directly.
He clarified, “We maintain an open approach to collaborating with other banks, and we have numerous examples of co-investments with various financial institutions. Entrepreneurs sometimes overestimate the potential for conflict, assuming that a partnership with us would automatically exclude Wells Fargo or other competitors. While this is possible in some instances, it is relatively uncommon.” (Timestamp: 18:01)
A full review of the discussion is highly recommended for anyone seeking a deeper understanding of corporate venture capital, the structure of Citi Ventures, and how to maximize the benefits of having them as an investor.
The complete transcript of the conversation is also available for review.
