The Rise of Corporate Venture Capital in Tech Startups

The Rise of Corporate Venture Capital in Tech Startups

Corporate venture capital (CVC) has become an increasingly common player in the world of startup funding over the past few years. In fact, according to the National Venture Capital Association, CVC participation in startup deals has increased from 12% in 2013 to 22% in 2018. In this article, we will explore the rise of CVC in tech startups, its benefits, challenges, and how it is changing the startup landscape.

What is Corporate Venture Capital?

Corporate venture capital is a form of startup funding in which established companies invest in small, emerging startups. CVC can take many forms, such as direct investment, acquiring a minority or controlling stake, or forming a joint venture with the startup. Unlike traditional venture capital firms, which are separate entities from established companies, CVCs are funded and operated by the parent company.

Benefits of CVC for Startups

One of the main benefits of CVC for startups is access to the resources and expertise of the parent company. This can include access to capital, technology, manufacturing, marketing, and distribution channels. In addition, CVCs can provide startups with credibility, as the endorsement of an established company can help attract other investors.

For established companies, CVC can offer a way to stay competitive and keep up with the latest trends in their industry. By investing in startups, companies can gain access to new technologies and disruptive business models, and potentially gain a strategic advantage over their competitors.

Challenges of CVC for Startups

While the benefits of CVC for startups are clear, there are also some challenges to be aware of. One potential challenge is the risk of losing autonomy. When a startup takes on CVC funding, they may become beholden to the goals and objectives of the parent company. This can limit a startup’s ability to pursue their own vision and may lead to conflicts of interest.

Another challenge is the potential for conflicts between the parent company and other investors. If the parent company is also a competitor in the same industry as the startup’s other investors, this can create conflicts of interest and make it difficult for the startup to secure future funding.

How CVC is Changing the Startup Landscape

The rise of CVC has had a significant impact on the startup landscape. With more established companies getting involved in startup funding, startups have more options for funding and growth. In addition, CVC can act as a bridge between startups and the larger business world, providing startups with access to resources that they might not have had otherwise.

CVC has also been a factor in increased competition in the startup funding space. Traditional venture capital firms are now competing with CVCs for deals, and the increased competition has led to more favorable terms for startups.

Examples of CVC in Action

There are many examples of CVC in practice. Salesforce’s venture capital arm, Salesforce Ventures, has invested in over 375 startups since its inception in 2009. Intel Capital, the venture capital arm of Intel, has invested in over 1,500 companies since 1991. And Google Ventures, the venture capital arm of Alphabet (Google’s parent company), has invested in over 300 startups since 2009.

Conclusion

Corporate venture capital has emerged as a major player in the world of startup funding, and its influence is only set to grow in the coming years. While there are challenges to be aware of, the benefits of CVC for startups are clear and can help them access the resources and expertise they need to succeed. As CVC continues to change the startup landscape, we can expect to see even more established companies getting involved in startup funding in the future.