Why is the Corporate Venture growing so fast? What are the keys? by Jean-François Caillard

Title - “Why is the Corporate Venture growing so fast? What are the keys?”

Author - Jean-François Caillard, https://about.me/jfcaillard

TL;DR - CVC funds have rapidly increased in number and size over the last few years and most of them invest in startups for strategic reasons besides financial returns.

Helpfulness - 4

Tags - corporate venture capital, CVC, CVC funds, startup investing

Questions answered:

  • Why do many corporations invest in startups?
  • How significant is the role of CVC funds in startup investing today?
  • What competitive advantages do CVC funds have against conventional VCs?

Summary:

  • Over a thousand major companies worldwide have launched a corporate venture capital (CVC) fund.
  • CVC funds have rapidly increased in number and size over the last few years.
    • In the US, CVC funds have supplied around 20% of the total amounts invested in startups.
    • Globally, CVC funds invested around $83.5 billion in 2016 (about 100% increase from 2014)
    • CVC funds’ share of financing currently represents around $25.8 billion (article written in 2017)
  • Most CVC funds invest in startups for strategic reasons (not just to get returns)
    • Strategic objectives generally observed:
      • 1. Identifying/financially supporting innovative startups that can bring innovation to the company (economic intelligence)
      • 2. Taking positions to better steer their approach to subsequent acquisitions
      • 3. Supporting the company’s small business partners
  • CVC funds’ competitive advantages:
    • They know their business/industry very well, have in-house expertise and access to market information that is not public
    • They can even bring markets to their portfolio startups.

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