Global Corporate Venturing will publish next week its October magazine and analysis by Kaloyan Andonov indicates an interesting K pattern of some experienced corporate venture capital (CVC) groups using the crisis to accelerate their investments and a record number of new entrants making their first deals while a middle tranche is doing less.
Overall, when compared to Pitchbook data for the first half of the year when CVCs were involved with 53.9% of US deals by value, it seems that CVCs and others have been instrumental to supporting the venture funding rather than dragging it backwards as in the dot.com boom and bust 20 years ago.
As Brian Walsh, head of Wind Ventures, the US-based CVC of Chilean energy, mobility and retail conglomerate Copec, said: “It is the same dynamic as when cleantech 1.0 fell apart [around 2008]. Corporate support into energy, materials, sustainability technologies and models was pivotal in keeping the innovation engine going that many of us are enjoying now.”
Will Gornall, assistant professor in the finance division at University of British Columbia in Canada, added: “Interesting findings. I was initially surprised. My intuition here is that CVC would be more hurt than traditional VC funds by covid[-19].
“Basically, the nominal capital commitments of VC funds insulate them from economic shocks, while CVC are pulling from corporations which may be capital constrained as a result of covid.
“My current hypothesis, which lines up with an in-progress rewrite of the VC survey, is that the main impact of covid was disruption.
“Two ways that could boost corporate participation. First, if corporations and CVCs have in place strategies and assets and may have to invest in innovation to move forward. VCs have more flexibility, and so they prefer to wait to see how things shake out.
“Second, if corporations offer a stability advantage to startups or have an informational advantage, then their relative attractiveness as funding partners could increase. Taking CVC investment might allow companies to partially derisk.”
To add your perspectives, please take our annual survey, which will be aggregated for our World of Corporate Venturing annual review and inform the agenda plans for the GCV Digital Forum 3.0 on January 27.
