In just the past 6 weeks or so, I've spoken to five different large corporations with newly launched corporate venture capital operations. Is this just a coincidence or a true trend? Seems like a trend though unscientific, of course.
Let's be clear: each of these has slightly different structures and need to satisfy fairly different goals, such as
- Capital gains
- As a path to future acquisitions
- Understanding what new innovative technologies and companies are out there
- Helping to seed a market for their own products
...and so on, with set-ups such as
- Extensions of the existing M&A department
- Wholly owned venturing arms funded with balance sheet money on an as-needed basis
- Capital ring-fenced specifically for venturing and handed to a professional manager
- R&D or strategic marketing personnel double-hatting as investment managers
Entrepreneurs who seek or are sought out by corporate venturing arms should understand the differences between each approach.
If a trend is truly taking hold, this would mark probably the first renewal of the corporate venturing scene since the dotcom bust. I worked on an academic research project just after the bust to investigate the motivations of corporate venture firms. At that time, corporations were just as caught up in the dotcom frenzy as VCs, entrepreneurs and the general public, but most of them shut down their venturing arms soon after. We'll have to see whether the current trend will prove to be more sustained. It's certainly a possibility, not least because capital markets are currently much more circumspect than they were a decade ago.