Why is the Corporate Venture growing so fast? What are the keys?

More than a thousand major companies worldwide have launched a Corporate Venture Capital (CVC) fund , and, in the United States, they are taking part in one in five start-up financing rounds, supplying 20% of the amounts invested. There has been continued strong growth in the recent years. Around the world, they are taking part in rounds for a total of $ 83.5 billion in 2016 according to GCV, up 100% compared to 2014. CB insights assess that their share of financing representing $25.8 billion : why this massive increase? The author has been a CVC for 10 years. French version here

Corporate Venture Capital is a risky investment in innovative companies, like any venture investment, the difference is funds come from a large company. Unlike the investments of conventional venture capital funds that only respond to a financial logic, the return on investment of these funds is also strategic. And their strong growth in the US as in Europe shows that it works.

A very wide variety of profiles

There are several segments of Venture Capital funds: from seed investment (companies not yet making significant income), to regional, sectoral funds … up to “Capital Development” aiming at profitable companies, to enable them to expand, geographically or through M&A.

Corporate Venture funds have an even greater diversity of profiles because in addition to this size segmentation, each industry has its specificities, and each company defines its investment policy. Nevertheless, we note that Corporate Venture investments have many similarities with Venture Capital:

• it’s a bet on the team, its talent, its complementarity, its ability to adapt and grow
• it is a bet on a market segment and the ability of the team to seize it within a reasonable timeframe
• it’s a portfolio logic: you have to diversify your bets to optimize your efforts.