Editorial: Corporate venturing boom enters its mature stage

The boom in corporate venturing is arguably entering a phase of maturity.

New entrants have increased the pool of corporates investing in start-ups – our broad definition of corporate venturing – by 20.4% in the last four years to 1090.

Yet this growth is slowing down. An analysis of our unit data shows we tracked fewer new entrants last year thanin the previous three years, with 28 units set up, comparedwith 69 and 70 new entrants in 2012 and 2011 respectively, and 55 new entrants in 2010.

General activity thus may be turning from a period where corporations realised they should explore the viability of corporate venturing to a more mature period for manyunits during which they begin to prove themselves.

It is probably fair to say that investment is where we will see the greatest short-term pick-up in activity. The most active units are generally older than the crop of newentrants we have tracked, so assuming these units also domore deals, it is fair to expect corporate venturing investmentactivity to rise significantly in the coming years as thedeal pace of these new entrants picks up. The most active unit founded since 2010 is Amex Ventures, launched by the US-based credit card company, for which we tracked 16 deals last year, making it the 15th most active corporate venturing unit.

Should activity materialise from the new units, this could lead to a significant reshaping of the balance of power in the start-up world. Our end-of-year analysis, out last week, written by our news editor Quentin Carruthers, showed there were 65 corporates which had completed more than five deals.

This analysis suggests, assuming a rise of activity from the new entrants, that corporate venturing is approaching, and may soon overtake, the venture capital industry in terms of the number of active players. Fund of funds Flag Capital was reported by news provider Fortune assaying last year that there were only 84 active US venture firms, defined as firms which did more than four deals and invested more than $4m in capital.

Over the long term, units will also need to deliver exits. While the main goals of corporate venturing are generally strategic advantage, it will be hard for many of the new entrants to justify their success without demonstrating strong returns. Those units best able to enjoy their maturity will be those that can boast such trophy deals.

At the IBF Corporate Venturing and Innovation Partnering Conference in Newport Beach today, I will be moderating a panel – the Evolution of corporate venturing: dealing with change – and interviewing Jack Leeney, of Telefónica Ventures, the corporate venturing unit of the Spain-based telecoms business, Davorin Kuchan, of venture firm Capbridge Ventures, and Ray Schuder, of AMD Ventures.

I will take the opportunity to get these panellists to voice tpheir opinion on how they expect the current crop of new entrants to evolve, drawing on their experience at the forefront of large corporate venturing programmes during the past few years.

As the industry matures, Global Corporate Venturing will also be examining how corporate venturing can reshape the venture industry positively at our May 20-21 symposium –  Pushing the frontiers of venture capital: creating a sustainable ecosystem from the golden age (see details).

We have contended since we were founded that the current moment is a golden age for corporate venturing, as today’s market dynamics, with cash-rich corporations and huge levels of innovation in the start-up world, are likely to mean that corporate venturing is set to thrive as a logical bridge between the two communities.

The influx of units into the sector supports this thesis. How the units mature and what they do next, will hopefully lend credence to our bold claim that this is indeed a goldenage.