Corporate venture capital ramps further in 2018
Guest column by Madison Pedigo, director, innovation and entrepreneurship programs, Naveen Jindal School of Management, UT Dallas
During the past ten years, corporate venture capital (CVC) investment has grown to represent a significant component of total VC investment. CVCs are investing for strategic awareness and financial return. From a startup perspective, CVCs provide capital but also may provide strategic guidance, sales and marketing channels, business development opportunities and other benefits. The mutual beneficial relationship between corporations and startups is an important part of the entrepreneurial ecosystem.
For the fifth straight year, more than 1,000 venture investments involved corporate venture capital programs, and 2018 is on track to make this a sixth year in a row. For 3Q18 YTD, the percentage of all venture capital deals that CVCs participated in has increased to more than 16 percent, and CVC investments represent an amazing 46 percent of total VC dollars invested. Reference the graph from the 3Q18 NVCA Venture Monitor.
As shown in graph, the percentage of total deal value (dollars invested) is much higher than the percentage of total number of deals which implies that CVCs are investing more capital per transaction than regular venture capital firms. A major driver for this is that CVCs are not as active at the “angel and seed” stage where the dollar amounts are lower. Instead, CVCs participate more frequently at the “early and late” stages.
Data from another source also shows a similar increase in CVC activity, although the percentages are different due to methodology differences.
CVC activity in other areas of the world is also significant. Per the PWC Moneytree, CVC participation in deals in Europe for 3Q18 was about 28 percent which is roughly the same as in the U.S. CVC percentage of deals in Asia was about 35 percent, which is significantly higher than in the U.S. or Europe.
The top CVC investors are well known to many of us. Per PitchBook, the most active CVCs in 2017 were: Google Ventures (GV), Intel Capital, Salesforce Ventures, Comcast Ventures, Qualcomm Ventures, Microsoft Ventures and Bloomberg Beta, each of which participated in 20 or more deals. Many of these are also the most active as acquirers of the companies in which they invest. Per Crunchbase News, the most active CVC acquirers were: Intel Capital, Google Ventures, SoftBank Capital, Comcast Ventures and Qualcomm Ventures.
CB Insights has a slightly narrower definition of what constitutes a CVC program. Per CB Insights, a total of 546 CVCs invested during 2017. The top CVCs are shown below with Google Ventures, Intel Capital and Salesforce Ventures also leading this list.