Corporations are expanding their venture capital commitments
Corporations increased venture capital investing last year, with some executives saying recent market shifts brought on by the pandemic pushed their companies to back technology startups.
The number of companies entering the asset class for the first time jumped last year and the total value of venture deals featuring corporations rose, data show. The activity stands in contrast to previous periods of financial uncertainty when many corporations pulled back from startup investing, which drew ire from traditional venture firms.
The shift is yet another indicator of how the asset class is becoming increasingly attractive to non-traditional venture investors and to companies aiming to keep abreast of disruptive technology. Outsiders such as hedge funds, private equity firms and companies are playing a larger role in dealmaking.
Additionally, the pandemic kicked markets such as e-commerce into overdrive and accelerated a broad migration of many services online. This heightened many companies’ interest in strategically backing tech companies that are relevant to their business, corporate investors say.
The number of first-time corporate investors in the US last year jumped 43% to 744 compared with 2019, according to Global Corporate Venturing, a data provider and media publication.
Meanwhile, the overall value of US venture deals that corporations participated in rose 15% to $67.6bn in 2020 from $58.8bn, according to a report from analytics firm PitchBook Data and the National Venture Capital Association, an industry trade group.
By comparison, the value of US venture deals that corporations participated in fell 30% to $6.9bn in 2009 amid the 2007-2009 financial crisis, according to the report.