The corporation as venture capitalist

At nearly 30% of all venture capital investing in 3Q13, corporations with formal VC arms have again become an important part of the tech startup ecosystem. Venture capital database CB Insights has the [DC1] latest data:

  • Although Corporate VC  also invests in early rounds, their impact is greatest in latter rounds, where their deep pockets—an average of $17 million per deal—especially fit the larger amounts raised.
  • Corporate VCs invested in 140 deals (16% of all VC investments)—the highest number in several years and likely since the boom over a decade ago, for a total value of $2.1 billion in 3Q13.
  • Tech firms are the most active corporate VC investors, with Google Ventures, Intel Capital, Samsung Ventures and SAP Ventures at the top of the list.
  • Gigaom mobile curator Colin Gibbs has already looked at the mobile findings in more depth, but mobile deals represented a quarter of all corporate VC deals on the quarter.
  • Healthcare and clean tech investments are down significantly, while cloud and big data still garner significant attention.

Corporate venture capital is more of an external form of investing in innovation that may or may not encompass a technology that is strategic and complementary to the primary business of the enterprise. Early familiarity with, and introductions to, the startup technology and firm may or may not benefit the investing firm’s core business, and traditional VC exit events are more likely to be the investing goal.

But strategic investments, beta trials, and early customer relationships give more firms an opportunity to understand and leverage new technologies ahead of the general market. Mobile, cloud, analytics and payments are among the areas where startups are useful laboratories for technology buyers across a wide range of vertical industry sectors.

Walmart is among the most aggressive of the major non-technology enterprises acquiring startups to develop proprietary technology. Like Walmart, some IT buyers will find value in bringing the whole startup into the company for proprietary development, and technology is of course becoming central to more vertical industries. There is also a wide variety of lesser ways in which an enterprise can engage in a synergistic relationship with a startup that can either build over time—or reach a conclusion without significant cost for the experience and education.