The global venture capital market took longer than a year to reach its 2021 high. Additionally, recovering from the excesses of the previous year will take some time. New corporate venture capital (CVC) statistics gathered by business intelligence company CB Insights make that point quite obvious. According to the company’s most recent report on the subject, CVC activity was solid in the first quarter, notwithstanding certain weak regions that we believe emerged as the quarter approached its conclusion.
Expecting CVC to reversal course and sprint back near records appears improbable given previous tendencies we’ve seen in the greater venture capital sector; additional decreases seem to be a logical assumption. It is hardly surprising that CVC is declining while venture capital as a whole slows down. Since CVC statistics were paired on the upward, it is not surprising to see them fall at the same time as venture capital data.
The slight drops in CVC that we’ll see soon are significant for reasons other than just keeping track of startup funding flow. Recall that TechCrunch looked at the idea of historically high levels of CVC investment perhaps translating into a sizable number of startup M&A this year. Given that there are now even more possible investment deals that might turn into acqui-hires as the year proceeds, the fact that corporate venture capital did not see a sharp fall in Q1 2022 lends more support to the idea.
Before narrowing down our emphasis to geographic trends to determine where things are hotter and colder, let’s get a handle on the shifting tempo of CVC activity. (Hint: China and Europe are outliers that are moving in separate ways.) We’ll revisit the M&A debate before talking about which CVC may be the most vulnerable to shifting venture circumstances. Better times have passed for the startup exit market. Heck, there have been worse times for the startup market.
Startups rolled into 2021 more than hot after a volatile and ultimately aggressive 2020 in terms of venture capital. Around the world, new tech businesses received record-breaking amounts of venture money last year. If they were highly in demand, some startups even raised two or three times in a single 12-month period. Corporate venture players (CVC funds) also shot cash into the market last year, in addition to traditional venture companies.
