Stop investing in startups. Become their customer instead

Few things unnerve the corporate sector more than uncertainty. As management teams navigate geopolitical turbulence, persistent inflation, and accelerating AI adoption, large companies are turning increasingly to partnerships with smaller firms — often through corporate venture arrangements. When done right, such programs encourage a culture of experimentation while harnessing the expertise of intensely focused, highly specialized start-ups. These partnerships plant seeds that will yield benefits and provide crucial support as companies make sense of an ever-changing business landscape. Companies that overlook corporate venturing risk falling behind.

During the earliest waves of corporate venturing (dating back to the 1960s), start-ups were cast as Davids against corporate Goliaths. The antagonism was mutual — smaller newcomers were labeled, tellingly, as disruptors. Venturing programs were used as fairly blunt instruments, often in pursuit of diversification goals or to realize financial gains in opportunistic ways. Fast-forward to today, and we find venturing programs to be remarkably nuanced — embodying a sophisticated management practice. The modern environment is better described as a new symbiosis in which established corporations collaborate with start-ups to create deep ecosystems that foster innovation. Corporate venturing has become a tool for adapting, evolving, and responding creatively to changing business conditions.

Corporate venture capital — the traditional model in which large firms take equity stakes in startups — remains a potent tool. Intel and Exxon institutionalized the practice decades ago, and it has proven durable: across hundreds of companies in our global sample, my co-authors Gary Dushnitsky, Claudio Garcia, and Valery Yakubovich and I find adoption rates of 50 to 60 percent. The billions of corporate dollars now flowing into AI innovators like Anthropic and OpenAI illustrate how influential equity-based programs can be.

But equity is not the only entry point — and for many organizations, it may not even be the best one. A newer model, venture clienting, is gaining ground fast, and it works on a fundamentally different logic: instead of investing in a startup, a corporation becomes its paying customer.

The distinction matters more than it might appear. In a traditional corporate venture capital arrangement, a company writes a........

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