CVCs currently account for more than a quarter of all venture capital investments worldwide. Founders are getting a greater piece of the fundraising pie as the capital situation becomes more unstable. In the midst of the Ukrainian crisis and growing inflation, which has caused many investors to be more cautious with their cash, entrepreneurs are looking for the longer-term stability that corporations can provide. For early-stage firms, corporate experience, R&D resources, M&A prospects, and networks are important. However, many conventional investors are skeptical about corporate venture capital ventures, saying that corporations should be buying, not investing in, other businesses.
However, in times of diminishing capital flows and more conservative investors, this strategy misses the benefits of corporate investment. For the past seven years, I’ve worked in corporate venture capital and teach a master’s program on the subject at the Madrid Bar Association. This is why corporations are investing again — and what entrepreneurs can expect in return. Corporate investing arms have become more powerful.
While just a few corporations used to invest in startups (and those that did were mostly focused on software), today almost every corporation is participating in VC and covers a wide variety of specialty industries. This means that there will be more corporate money and players available for startups to consider. Corporations have also realized the value of pursuing a more open innovation approach, in which they invest in external startup ideas rather of testing just internally. This change is why several corporations, such as Mondelez International (previously Kraft), Nike, Microsoft, American Express, and PepsiCo, have dedicated investment funds to startups.
Corporates can execute successful startup transactions and provide value to them faster by combining finance and expertise. These offices not only provide capital and tools to help businesses thrive, but they also bring decades of investing expertise to the table. Corporates can execute successful startup transactions and provide value to them faster by combining finance and expertise. Corporations, despite their size, can be remarkably nimble.
The bulk of CVC investments have reacted to and paralleled developments in the startup environment over the last decade, helping to increase the bar for CVC investments. We’ve changed our strategy several times at Wayra to guarantee that we keep up with the startup environment. In 2018, we transitioned from an accelerator to a CVC to better assist more established entrepreneurs with joint ventures and growing possibilities. Later, we established a fund to aid in the transition of companies in Southern Europe and Latin America. CVCs should be involved in your venture.