Investments in corporate venture capital boosted by new entrants and mega rounds
the venture capital The 2021 boom is not built from purely traditional VC money. A host of other sources of capital played a role in the global trend, from new methods of disbursing angel and seed capital to crossover funds flowing into late-stage startups. And amid all the noise, record totals, and fast-moving deals, corporate venture investors were busily investing dollops of parent company money into much smaller companies.
Corporate venture capital, or CVC for short, is the method by which high net worth companies build their own investment branch. Traditionally, these efforts combine strategic goals (M&A, early access to technology, partnerships) and financial goals (return on returns). The exact mix varies by company and CVC effort, but it’s rare to find an entrepreneurial venture that has neither. This makes their investments an interesting mix of traditional entrepreneurship and business opportunity.
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CVCs were busy last year. New data from CB Insights makes it clear that 2021 was a colossal period for CVCs, an all-time high by some statistics and a near record year for others.
CVCs have also been in the news lately, thanks to MongoDB – a NoSQL company that went public in 2017 – creating its own fund, an event that the tech world took note of. MongoDB recently joins public companies like Coinbase in hiring corporate investors before it reaches mega-cap status. The trend continues: we’ve even seen private companies launch their own CVCs, a testament at the same time to the extended period in which high-growth tech startups remain private and the vast amount of capital available to pre-IPO companies.
Today, we examine the data behind CVC investment growth in 2021 with commentary from Serge Tanjga, SVP Finance at MongoDB. Tomorrow we’ll dive into the hows and whys of CVC in today’s business environment with commentary from a number of corporate investment players – and even a publicly traded company choosing to not build its own investment arm. Sounds good? Let’s get to the data.
How fast is corporate venture capital investment accelerating?
There are two ways to track corporate venture capital growth: the rate at which new CVC ventures are established and the rate at which the larger CVC segment invests.
We take them in order. It is clear that more CVCs are being assembled in today’s market than almost ever before. Indeed, data from CB Insights shows that some 221 new CVCs were built in 2021, a massive 53% increase over 2020 data. However, the 2021 result was fractionally lower than the 259 built in 2018. . That said, 2021 was the second-warmest year we have data for when it comes to new CVCs coming to market.
Tanjga, who discussed the CVC market from a technology perspective, said more mature tech companies “tend to set up CVC weapons because they have excess capital to bet, or because being in the VC space will help.” in their brand positioning,” while younger tech firms “tend to initiate CVC efforts to attract startups to build on their product, fund their existing customers, or drive go-to-market partnerships. ” So when we discuss how many CVCs are being built, keep in mind that they are not monoliths when it comes to goals.
We cannot distinguish a perfect split of CVC focus from the pace at which new funds were launched last year. But assuming the new crop of corporate venture players is similar to those that preceded it, it’s safe to conclude that a large number of return-first and strategy-first CVCs have launched in 2021. For startups, this means their range of equity financing options is not only broader than ever, but the business portion of the market is deeper than ever.
Why do we care?