The Challenges of Corporate Venture Capital
Corporate Venture Capital (CVC) has gained popularity as an investment strategy where large corporations invest in startups to access new technologies and drive innovation. However, this approach is not without its challenges.
One of the main challenges is finding the balance between corporate control and entrepreneurial autonomy. Corporations must provide support and resources without imposing restrictions that hinder innovation. It is crucial to maintain a collaborative environment that allows startups to maintain their agility and ability to take risks.
An example of this challenge is Google's acquisition of Nest. Although Nest initially maintained its independence, tensions arose due to differences in focus and culture between the two companies. This highlights the importance of establishing clear agreements and strategic alignment to ensure long-term success.
Another challenge is the effective integration between the startup and the corporation. Open communication and careful management of expectations are essential. The case of Blue Bottle Coffee, acquired by Nestlé in 2017, is an example where integration took time and effort as they had to maintain the brand's essence and focus on quality and sustainability.
CVC offers many opportunities for innovation, but challenges must be overcome. There must be awareness and balance between corporate control and the autonomy required by the startup. Additionally, work must be done to achieve integration that maintains value creation and leverages the best attributes of both the corporation and the startup. Overcoming these challenges helps ensure that CVC efforts are fulfilled and maximize the potential of investment in innovation.
CVC Market Summary Q2’2023
For Q1’2023, the number of deals closed that had a CVC participating in the round was 842, with an amount of capital raised of $12.8 billion dollars.
With this, the global CVC market continued its declining path presenting a fall of 44% in the number of deals compared to Q1’2022, reaching its lowest level since 2018. Also, the amount of capital raised dropped by 12% compared to the past quarter.
The most active region this first quarter was the US; companies in this country captured $7.6 billion dollars in funding, 59% of the global capital raised, accounting for 33% of the total deals. Asia was another very active region that accounted for 39% of all deals, followed by Europe with 22%, and the remaining 6% accounted by the rest of the world.
For this Q2’2023, the market shows to keep slowing down. Since the middle of March to the middle of June, the total money raised in these deals has been around USD$11.6bn, half of those deals were Seed and Series A rounds. Some of the main transactions during this period have been the following:
- 04/04/2023: SJ Semi raised USD$340 million in a Series C+ funding round with a valuation of close to USD$2 billion, backed by TCL Capital. The Chinese startup offers semiconductor assembly and testing services based on multi-chip 3D technology. Other participating investors included Oriza Holdings, GoldStone Investment, Legend Capital, and Shang Qi Capital.
- 02/05/2023: Cohere closed a USD$270 million investment deal for its Series C round with a valuation over USD$2 billion, backed by Salesforce Ventures, NVIDIA, and Oracle. Cohere develops natural language processing models focused on business tasks, whether it is better understanding customers or writing targeted texts for specific audiences. The funding round was led by Inovia Capital and included participation from Thomvest Ventures, Mirae Asset, SentinelOne, and Schroders Capital.
- 23/05/2023: Antrophic raised USD$450 million in its Series C funding round with a valuation over USD$4 billion, backed by Salesforce Ventures, Zoom Ventures, and Google. Antrophic is dedicated to researching and developing artificial intelligence technologies, with a focus on "Human in the Loop AI" approach, which involves continuous interaction between AI systems and human experts. The funding round also included participation from Sound Ventures, Spark Capital, SVA, and Menlo Ventures.
- 08/06/2023: Upstream Bio announced raising USD$200 million in its Series B funding round, backed by Access Biotechnology. Upstream Bio develops monoclonal antibody therapy to treat inflammatory diseases. Other investors participating in the round include Omega Funds, Decheng Capital, Venrock Capital Partners, and Bain Capital Life Sciences.
- 20/06/2023: KoBold Metals raised USD$195 million in a Series B funding round with a valuation exceeding USD$1 billion, backed by Mitsubishi Corporation. KoBold Metals utilizes geochemical, geophysical, and geological data in statistical models to optimize cobalt and copper exploration. Andreessen Horowitz, Equinor Ventures, Bond, Breakthrough Energy Ventures, among others participated in the funding round.
- 23/06/2023: 1Komma5° raised USD$467 million in a Series B funding round with a valuation exceeding USD$1 billion, backed by Porsche Ventures. 1Komma5° provides environmentally friendly energy options for homes, ranging from solar installations to energy storage systems and charging stations. The round was led by G2 Venture Partners and included participation from b2venture, Blue Elephant Capital, and eCAPITAL.
Source: CB Insights, Crunchbase
The authors of this report are Héctor Shibata, Gonzalo Soriano, Ana Aguilar, David Pérez and Fernando Ojeda.
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