xcube founder and director Sebastien P
Singapore-based corporate venture studio xcube recently launched corporate venture portfolio equities (CVPE), an equity-based ecosystem of tech startups.
CVPE features a combination of venture-building initiatives, external early-stage startups and corporate partnerships. It introduces a holistic approach by investing in an interconnected ecosystem of tech startups.
How does CVPE work, how is it different from traditional venture-building models, and what are its objectives?
xcube founder and director Sebastien P discusses CVPE, its modus operandi, and its objectives.
What inspired xcube to launch the CVPE?
The CVPE initiative was driven by a few key insights:
Adapting to market evolution: In today’s corporate landscape, competition is no longer against a single business but rather entire business ecosystems. Having a competitive edge and strong economic moat nowadays means building mutually beneficial partnerships rather than relying on isolated endeavours.
Sustainable business model: Startups from venture studios have a higher scale potential; research shows that one in eight corporate ventures grows into a large-scale business while only one in 500 for typical startups.
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Addressing industry challenges: The current corporate venturing landscape is often characterised by a low level of symbiosis due to organisational resistance, lack of top management support and rigid control mechanisms.
How does CVPE differ from traditional methods of venture capital investment?
CVPE uniquely combines the benefits typically associated with venture capital (VC) investments and direct investments in startups. Investing in an ecosystem company allows investors to gain access to a portfolio of startups working together to address significant market needs.
Diversification: Similar to a VC fund, CVPE provides a diversification advantage. The collective strength of the ecosystem offers built-in resilience, enables to which helps safeguard investments against startup setbacks.
Enhanced equity value: Investing through an ecosystem company allows investors to access significant additional equity value since the company acts as the founder and co-founder for the startups in the ecosystem.
Could you elaborate on how CVPE fosters synergistic operations among invested startups?
The ecosystem company foster synergies thanks to its dedicated venture team whose role is to build:
Cost synergies: offering support/resources and functions to the startups such as HR, finance, marketing, etc.
Go-to-market synergies: combining startup products and entering markets that were previously inaccessible to them.
Innovation synergies: leading co-innovation or combining the capabilities of various startups to create new products.
Ecosystem synergies: enhancing the overall productivity, efficiency, and resilience of the ecosystem as a whole, often resulting in outcomes that are greater than the sum of the individual contributions.
In other words, being part of the ecosystem offers a competitive advantage to each startup.
What market needs does CVPE aim to address through its ecosystem of tech startups?
xcube is industry agnostic. We do not have specific verticals but two transversals: Web3 and AI technologies. These enable us to develop disruptive solutions for different industries. We currently have ecosystems focusing on finance, HR, and education.
How does xcube plan to engage family offices and VC firms with the CVPE model?
We have a team dedicated to raising funds for these ecosystem companies, as well as creating partnerships with financial advisors and private banks.
Can you provide examples of the types of startups that will be part of the CVPE initiative?
The startups that we create and engage with are tech companies (Web3/AI-driven) at the seed/pre-series A stages. Currently, we are focused on three main ecosystems: fintech, skillstech, and wealthtech.
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The startups within each ecosystem cover different aspects within the same field. For instance, in our fintech ecosystem, the startups involved include investment platforms, trading technologies, Real-world asset (RWA) financing, know-your-customer (KYC) solutions and more.
What criteria does xcube use to select startups for inclusion in the CVPE ecosystems?
The interview delves into xcube’s CVPE initiative, blending VC and direct startup investments. It highlights the model’s benefits, risk management strategies, fundraising plans, and startup selection criteria.The criteria are product complementarities, vision compatibility, strength and commitment of the entrepreneurial teams, and early-stage startups (seed/pre-series A).
How does xcube plan to ensure diversified risk management within the CVPE model?
In our CVPE model, we work with various startups, each focusing on a specific market segment. This variety helps spread out our risks because the startups are not all dependent on the same market conditions. If one of the startups fails, xcube has the first right to refuse to buy the assets to ensure the continuity of the products and the ecosystem.
Additionally, at the ecosystem level, by pioneering into several countries, our CVPE model naturally diversifies business risks, reducing the impact of having one single go-to-market strategy.
What are the expected benefits for startups participating in the CVPE initiative?
The startup’s advantage is to access hands-on expertise and shared capabilities, reducing costs. They can indirectly enter markets they do not target individually, enjoying additional traction and revenues through profit sharing.
Additionally, they gain peer support from the other entrepreneurial teams to solve their challenges. And finally, they can leverage xcube’s corporate psychologist to build and support their entrepreneurial teams.
Can you outline the fundraising strategy for the four distinct corporate venture ecosystems?
First, we ideate and validate each ecosystem, then present each ecosystem to the VC funds we’ve partnered with. They stress-test the ecosystem strategy and soundness, then act as a lead investor to enable to kickstart the development of the ecosystem. This initial backing also instils confidence in other potential investors to participate.
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