Praveen Arivazhagan, Raju Sarma, Sachin Lulla
The largest US companies have a deficit of $9 trillion in shareholder value. This is the gap between the market capitalization of the majority of the S&P 500 in January 2025 and the companies needed to achieve first-stage shareholder return growth of at least 15% per year by 2029 (Figure 1). The group excludes seven spectacular high-tech stocks and their distinctive growth profiles, as well as banks and real estate investment trusts (REITs) with different capital structures.
Figure 1: Growth order: Companies must identify, approve and fund the intrinsic value of $9 trillion.
1. Based on S&P 500 ingredients as of January 14, 2024.
2. “Banks” include a variety of banks, regional banks, investment banks and securities companies, asset management and custody banks, consumer finances, and diverse financial services (capital IQ sector classification).
3. Magnificent Seven is a group of high-performance, influential companies in the United States.
Source: EYP Analysis, S&P Capital IQ
How can the remaining 432 companies configure their current $9 trillion deficit? Corporate venture building is an essential tool for increasing P&L’s growth and business market multiplier.
Yes, building a new venture can be difficult. Companies need to find that they are suitable for the right product market, develop a mobility strategy to the market, and ensure that teams with the right entrepreneurial mindset can distinguish themselves in the market and win higher multiples.
However, established companies have an advantage over startups, such as customer relationships, intellectual property, supply chain ecosystems, funds, or differentiated assets. These donations will help corporate venture builders establish businesses that can quickly deliver large returns.
However, donations can vary from company to company, leading to a clear way for a company’s venture building to work.
Based on the buildings of over 70 ventures, Ey-Parthenon’s corporate venture builders categorize new ventures into four archetypes, taking into account the triggers that encourage the need to develop new ventures and specific donations for companies (Figure 2). Companies embarking on venture buildings need to coordinate their efforts with these four archetypes to maximize their chances of success.
Figure 2: Four corporate venture building archetypes
Four archetypes
1. Corporate Launchpad
Triggers: The company identifies internal issues, uses donations to solve them and create solutions that can be sold. By becoming your own first customer, your company can test your product or solution before launching it.
Donations: Ability with commercial potential such as talent, capital, and industrial information. “First Customer” ready within its own company. Ability to internally steer and incubate ventures.
Benefits: Create new P&Ls to solve your own challenges and drive growth. By testing internally, you can release solutions in the market with certainty of success and a faster path to growth.
Example: Industrial companies have recognized that the lack of transparency and high cost in insurance pricing can irritate customers. The company has developed an insurance venture to address customer concerns about transparent pricing and high cost.
The company has access to data entry such as customer behavior and equipment health, helping to assess insurance risks more effectively and generate more accurate and transparent pricing than its competitors. New ventures allow companies to improve product bundles, increase “stickiness”, gain a larger share of the total cost of ownership, and reduce the total cost of customers.
2. Technical attackers
Trigger: To develop a disruptive, tech-centric business that leads legacy competitors, the company is about to enter a new business or region with little market share.
Donation: Ability to pilot and incubate in the core business. Customer and other ownership relationships.
Benefits: The ability to disrupt markets with low market share using technology.
Example: Manufacturers of residential and commercial industrial equipment have sought new growth in smart connected product solutions, offering energy management, real-time monitoring, leak detection alerts and fleet management. The company has innovated with modular electronic controls with built-in connectivity using established product heritage.
We also used customer partnerships to create digital revenue streams, including subscription revenue from installers, to provide high quality leads for parts, services, maintenance and exchanges. The large installation base also allowed the company to create new partnerships with demand aggregators and utility companies to offset the load during peak demand periods, generate new revenue from utilities, and take over savings to consumers.
3. IPIgnite
Trigger: The desire to increase the market multiple by monetizing its technology or intellectual property (IP) becomes a new business that can direct potential multiples.
Donations: proprietary IP, research and development (R&D), products, pricing capabilities, value chain expertise, data. Features with commercial potential.
Benefits: Reuse IPs that contain dormant IPs to create businesses that can command higher multiples than the core.
Example: Global companies’ growth rates were highlands as contractors sought better pricing and service-level contracts. Using a large procurement and a supplier base, pricing power and a substantial customer base, the company transformed its procurement capabilities into a profitable B2B market, improving contractor prices and a supplier commitment volume.
4. Customer X
Trigger: Signs of stagnation throughout the current product.
Donations: Deep clients and other ownership relationships. Channels and distribution partners.
Benefits: The ability to rapidly expand new products by using existing customer-ecosystem relationships in new ways.
Example: Consumer product companies are facing a long-term decline in demand for their core products. But it had to do with millions of consumers and thousands of retailers. Using these relationships, the company developed a new retail services platform, providing analytical tools and value-added services to independent brick-and-mortar retailers, driving profitable growth and efficiency.
There may be duplicate archetypes
These archetypes are not mutually exclusive. There may be multiple archetypes to appear for new ventures. Companies are building corporate Launchpad, becoming their first customer and igniting existing IPs. Alternatively, you can rethink what existing customers can do by using existing IPs in new ways.
Still, to find an entirely new P&L using venture building and increase the total shareholder return, companies can start by determining what these benefits are and which venture building archetypes make the most sense.
Learn more about the Ey-Parthenon Corporate Venture Building team to launch, build, expand and rethink their core businesses to grow.
Praveen Arivazhagan is the Chief of venture builders, Ey-Parthenon Americas Corporate Venture Building Leader, Ernst & Young LLP.
Raju Sarma is a senior venture builder and LA venture garage leader for Ey-Parthenon, Ernst & Young LLP.
Sachin Lulla is Ernst & Young LLP, EY Americas Consulting Industrial Products Sector Leader.
Charlotte Clark, Ey-Parthenon Venture Builder, and Ernst & Young LLP also contributed to this article.
The views reflected in this article are those of the author and do not necessarily reflect the views of Ernst & Young LLP or other members of the Global EY organization.
