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SECTORS START-UPS


I THINK FDI ISA DRAMATICALLY UNDERLEVERAGED TOOLWHENINTEGRATING NEWCAPABILITIES INTOABUSINESS


as between the US and Europe, they all have similar strategic goals. Peter Rowan, a former corpo-


rate venture capitalist turned academic who has studied the investment behaviour of CVCs glob- ally, says there isn’t a discernible difference. “International VCs have mimicked the behaviour of tradi- tional [US] players. The goal is always to get more information,” he clarifies. However, a few regions are


seeing far more CVC involvement than others. GCV Analytics data shows that Asia-Pacific was the leading global region for CVC-backed deals between 2011 and 2019, with almost 40% of deals tracked in the period. The Americas ranks second, followed by Europe, for CVC involvement in start-up funding rounds.


IPAdraw Some investment promotion agen- cies (IPAs) that typically focus on attracting FDI are now vying for CVC investment into domestic start- ups. Apex Brazil, the IPA of Latin America’s largest economy, has held an annual corporate venture capital event since 2015, aimed at convincing international corporate VCs to invest into domestic Brazilian start-ups. Meanwhile, the small Baltic state


of Estonia has also pursued CVC investment to bolster its local start- ups. “We negotiated with [German automaker] Daimler for two years to invest into Estonian start-ups to help them incorporate their services into their portfolio,” says Raido Lember, director of Invest in Estonia. This charm offensive brought a


$175m investment into Estonia’s ride-hailing company Bolt, pushing its valuation above $1bn, and help- ing to foster the country’s tech ecosystem, where Bolt still has its headquarters and reinvests. Anu Wadhwa, an associate


professor of strategy and entrepre- neurship at Imperial College London, says the locations into which CVCs invest are “determined largely by availability of the pool of start-ups. Governments can indi- rectly attract [CVC] by making their location a vibrant place for entrepreneurs.”


Start-uppush While corporates usually do not use CVC as a primary tool to expand


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into new markets, they often help the start-ups in their portfolio to internationalise. Gen Tschikawa, CEO of the Sony Innovation Fund, the corporate VC armof the Japanese tech conglomerate, says that start-ups often approach them to internationalise. “Many start-ups come to us


because they believe that we can support them on the international expansion side, and of course we spend a lot of time doing that. When we invest into Japanese start-ups, they look at us as a launch pad into the world,” he says. As multinationals often have


wide networks of subsidiaries and personnel across the globe, this can help start-ups to expand into new markets.


Covid-19 effects Despite CVC activity being down across the board in 2020, particu- larly in March and April, due to the coronavirus pandemic, new CVC investors have jumped into deals. In the first six months of 2020


there were a record 368 first-time corporate investors in VC, more than double the number in the previous year, according to GCV Analytics. “The initial focus [of CVCs] was


to aid and capitalise existing portfo- lio companies and then, if possible, look for some new opportunities as the pandemic lockdown has inevi- tably driven some valuations of start-ups down,” says GCV Analytics’ Mr Andonov. In many sectors, Covid-19 has


accelerated the transition to future technologies. This is particularly true of the energy sector, which saw oil prices fall into negative territory for the first time in history in April 2020. Mr Nagarajan at Equinor says it invested in three cleantech start-ups across the UK, US and Brazil between May and July 2020. “Covid-19 has in many ways rein-


forced the importance of, and urgency in, transitioning to a low carbon world. Net zero emission goals by both countries and corpo- rates will continue to drive the need for innovation and investments in clean energy,” he says. With the coronavirus crisis caus-


ing mass disruption to industries worldwide, corporates are likely to continue their stampede into VC, in order to be ready for a post- pandemic world.■


www.fDiIntelligence.com August/September 2020


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