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SECTORS START-UPS


The rise of corporate venture capital


CORPORATIONS HAVE RAMPED UP MINORITY INVESTMENT INTO START-UPS TO FOSTER INNOVATION. ALEX IRWIN-HUNT REPORTS


they attempt to gain insight into disruptive technologies and start-up ecosystems worldwide. In 2019, major companies


I


worldwide took part in a record 3237 corporate venture capital (CVC) deals, according to Global Corporate Venturing (GCV) Analytics. This is more than four times the number of corporate venture capital-backed deals in 2011. The number of CVC players has


also grown. Today there are almost 2000 corporations that engage in VC, more than double the number a decade ago, according to GCV Analytics. “Corporate executives have


become increasingly aware and thoughtful about howto apply [CVC] to support their own innovation programmes and the advancement of technologies within their indus- try,” says Paul Asel, managing part- ner at NGP Capital, the CVC armof Finnish hardware giant Nokia.


Techinvestors In 2019, the three most active CVC investors were all US technology


n recent years, corporations have increasingly invested into early- stage businesses and start-ups, as


giants, according to CB Insights – namely Google Ventures, Salesforce Ventures and Intel Capital – while Asian CVCs, such as Japan’s SBI Investments and Korea’s Samsung Ventures, were also piling into deals. The IT sector has accounted for


more than a fifth of global CVC-backed deals since 2011, with the health and services sectors ranking in second and third place respectively. In a world in which industries


have been redefined by disruptive technology and start-ups, fromthe likes of ride-hailing to financial technology, corporates have made minority investments into start-ups to ensure they don’t miss any of the action. But what drives these investments, and how does this relate to FDI?


Corporate benefits While the reasons for CVC invest- ment vary relative to the sector and focus of the corporation it serves, there are some common threads. “Corporate VCs typically invest


for optionality. They are looking at an acquisition of a technology that they want to use or their customers might want to use,” says Dave Rosenberg, a tech executive at soft-


ware company NetSuite, who formerly worked at the CVC arms of both General Electric and Merck. GCV Analytics analyst Kaloyan


Andonov agrees, adding that CVC units are also “used indirectly as a market intelligence gathering tool, pointing to the parent corporation what new thing there is, and if it should be aware or wary of it”. For example, in February 2020,


Israeli dairy-free yoghurt start-up Yofix Priobiotics received a $2.5m VC injection from a consortium of investors, including both German dairy giant Müller and France’s Bel Group. Similarly, US meat giant Tyson Foods has made investments into various meat alternative start-ups such as Beyond Meat (see page 12), Memphis Meats and Future Meat Technologies. Some CVCs look for emerging


businesses to include within their ecosystem. Salesforce Ventures is focused on creating the world’s larg- est ecosystemof enterprise cloud companies, helping to bolster its core business. Unlike institutional VC firms –


which are primarily driven by returns on investment – corporate VCs investment rationale is based


JAPANESE START-UPS LOOKATUS ASALAUNCHPADINTOTHEWORLD


80 www.fDiIntelligence.com August/September 2020


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