Corporate venturing investment rebounds

Corporate venturing investment has risen to its highest point since the financial crisis started, new figures show.

Start-up investments by corporates rose to the most since 2008 by number and percentage of the number of deals in the overall venture market, according to the MoneyTree Report by accountancy firm PricewaterhouseCoopers and trade body the National Venture Capital Association (NVCA) based on data by Thomson Reuters. Corporate investment was at its highest level by value since 2007, the report added.

Corporates invested in 551 deals worth $2.3bn, according to the data, reflecting 14.9% of deals in the venture market by number and 8.2% of the deals by value. The value and number of deals both marked a 15% increase on 2010 investment  by corporates.

Mary Kay James, DuPont Ventures and NVCA Corporate Venture Group Advisory Board Member, said: "The venture-backed community represents an immense source of creative ideas.  Aligning objectives through investment and integrating complementary capabilities assures that solutions can be brought forward at a scale that matters. Given these benefits we anticipate the total amount of Corporate Venture Capital [CVC] investment and the percentage contribution to the overall venture investment totals to continue to steadily increase in the coming year and beyond."

Mark Heesen, president of the National Venture Capital Association, said: "Corporations bring a unique and specialized perspective to venture investing and are increasingly becoming more active in supporting the growth of emerging technologies. In turn, the venture capital industry has embraced the CVCs’ depth of resources – including R&D, access to broad marketing channels and operating experience – as invaluable contributions to the success of the startup economy."

Corporate venturing units invested most money in the Industrial/Energy sector, with $974m invested in 95 deals. The most deals were done in the software sector with 284 investments worth $883m.

Corporate venturing units accounted for 22% of all Clean Tech deals, a marked increase of the proportion of investment in the sector against 2010, with the average for 2010 and 2011 standing at under 15%. 

Corporate venturing units also invested in 172 biotechnology rounds worth $694m.

Tracy T. Lefteroff, global managing partner of the venture capital practice at PricewaterhouseCoopers, said: "It is not surprising to see corporate venture capitalists becoming even more active in the Biotech sector. Larger biopharma companies have recognized that their expertise does not lie in early stage R&D – the smaller, more nimble venture-backed companies are more efficient at drug development.  Accordingly, the larger biopharma companies are looking to these venture-backed companies to help fill their pipeline as many of their blockbuster drugs are coming off patent.  Bringing corporate venture capitalists to the table early in the company’s development helps ensure that there will be interest in the drugs being developed and identify a potential acquirer early on, thus allowing the VCs to deliver more expedient returns to their investors."

The statistics were not welcomed by every market participant though. Paul Kedrosky, a venture investor and entrepreneur who runs the Infectious Greed blog, said in reaction to the statistics on Twitter: "Every tech cycle ends the same way: Infatuation with teen CEOs, exit journos to VCs, enter NYC-as-Silicon-Valley meme, and cue corporate VCs."