Corporate Venture Capital: What Trends will Shape 2022?
“We have this powerful lever at Google Ventures, which is to invest USD$200mm a year. This is a huge lever. It’s not all going into one place; it’s going into lots of start ups and founders and entrepreneurs, all of which are levers to try and change the world in one way or another”. Bill Maris — founder and first CEO of Google Ventures
Every year it becomes more evident that the combination of innovation and disruptive technologies is creating new business models that are dominating different geographies and industrial sectors.
A clear example is the case of Rivian, an electric vehicle company founded in 2009, which in 10 rounds of capitalization managed to raise 10,700 million dollars in November 2021 it was listed on the Nasdaq and to date it has a capitalization value of 76,000 million dollars.
Such developments have prompted companies such as Ford (market capitalization value of approximately $96 billion and General Motors $96 billion) to invest in startups in order to be innovative, competitive and remain relevant in the entrepreneurial ecosystem.
In fact, Ford is one of the main investors in Rivian; it has participated in 3 different rounds reaching investment amounts of up to $500 million in one of them.
General Motors (GM) has invested in companies such as Lyft, Nikola Motor Company and Cruise. The latter is a San Francisco-based company that develops autonomous vehicle technology and was acquired by GM in 2016 for more than $1 billion.
These large automotive companies have corporate venture capital (CVC) funds that give them access to technology innovation and disruptive business models.
Cases like Ford and General Motors are applicable to all industry sectors and an increasing number of corporations globally are setting up venture capital funds to invest in startups. It is therefore important to consider the key differences and challenges that are driving the VC sector.
According to data from Global Corporate Venture (GCV), by mid-2021, there were 1,242 corporates globally actively investing in startups, of which 27% were represented by early-stage funds. The birth of VCs is probably linked to the generation of new unicorns and decacorns that could at some point displace traditional companies.
The result of these developments can be seen in the number and volume of transactions by CVC. During the first nine months of 2021, more than 3,600 transactions were completed for a total value of $210 billion, investing mainly in sectors such as technology, healthcare, and finance, among others.
Despite there being more investment and liquidity in the ecosystem, there are areas of opportunity in terms of the professionalism of the participants and the search for the right people to leverage investments. For the same reason it is necessary to foster the relationship between ecosystem participants as mentioned by Alberto Onetti of Mind the Bridge and James Mawson of GCV at INC MTY Corporate.
A fundamental part is the relationship of CVCs with independent Venture Capital funds and startups. Symbiosis works both ways, i.e., there are benefits for both parties.
It is important to understand collaboration and the scope of collaboration so that participants do not have false expectations. In addition, corporations need to work on multiple initiatives in order to be part of ecosystems.
Venture capital investment is not the only option for corporate innovation and technology development. In fact, it is probably the last option and a resource focused on those companies that have a robust balance sheet and can invest more than $50–100 billion on a recurring basis over the next 20 years. Large corporations use multiple tools to engage with startups such as accelerator programmed, corporate venturing and M&A, among others.
Another important consideration is to think globally and act locally. Innovation has no borders and can be found in Silicon Valley or Tel Aviv, but also in Manila, Sao Paulo, Mexico City or Bangalore. Learning about technological advances and developments in other parts of the world can be key to clarifying the trends that will develop in the local and global landscape.
Corporates starting with a CVC can talk to others who have been operating in the ecosystem for a longer period and learn from them. CVCs like Google Ventures are a good benchmark for other funds to adopt best practices from the ecosystem.
Everything you see should be focused on innovation, monitoring what is happening in the ecosystem and the main trends, as you learn from others and from your mistakes you can refine your processes, improve, and succeed in the long term.
In addition, large companies must have the humility to recognize that they are not the most important. Within the ecosystem, entrepreneurs have greater relevance and should therefore be treated with respect, regardless of the startup’s stage of development.
“If I’m an entrepreneur, and I have a term sheet from Sequoia and Kleiner, that’s the safe choice. Google Ventures is the brave choice”. Bill Maris — founder and first CEO of Google Ventures
Note: please refer to the original publication at EL CEO: Corporate Venture Capital: ¿Qué tendencias marcarán 2022? (elceo.com)
Hector Shibata. Director of Investments & Portfolio at ACV a global Corporate Venture Capital (CVC) fund and Adjunct Professor for Entrepreneurial Finance.
Gonzalo Soriano. VC Investor at ACV.
ACV is an international Corporate Venture Capital (CVC) fund investing globally in Startups & VC funds.
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