Corporate venture capital Investments (CVCs) now represent more than a fifth of global projects. The biggest slice comes from the funding pie as founders have to navigate an even more uncertain capital landscape. In the midst of the Ukraine conflict and rising inflation — with many investors being more cautious about dollars — start-ups welcome the long-term stability that companies can offer.
Corporate knowledge, R&D resources, M&A opportunities and networks are invaluable to early stage companies. But many traditional investors have strong opinions about corporate venture capital projects, claiming that the corporate role is to buy back, not buy back, other companies. However, this approach ignores the benefits of corporate investing, particularly at times of dwindling capital inflows and increasing investor caution.
I’ve worked in corporate venture capital for seven years and taught a master’s class on CVC at the Madrid Bar. Here’s why companies invest back – and what startups should be looking for in return.
The investment arms of companies are getting stronger
While a few companies used to make startup investments (and those that did were primarily interested in software, nearly every company today engages in venture capital and spans a range of niche sectors. This means there is more corporate money and players for startups to explore. .
Companies are also becoming aware of the potential of a more open innovation strategy, investing in external startup ideas rather than just experimenting internally. This shift is why so many companies have investment funds dedicated to startups – just look at Mondelez International (formerly Kraft), Nike, Microsoft, American Express and PepsiCo.
By combining capital and expertise, companies can implement strong start-up deals and deliver value faster.
These branches not only allocate funds and tools to the growth of startups – they provide startups with decades of investment experience. By combining capital and expertise, companies can implement strong start-up deals and deliver value faster.
And despite their size, companies can be surprisingly fast-moving. In the past decade, the majority have responded to and reversed changes in the startup space, helping to raise the bar for CVC investments. At Wayra, we’ve adapted our strategy multiple times to ensure we grow as the startup ecosystem does. In 2018, we moved from being an accelerator to a CVC program to better help more mature startups with opportunities for joint ventures and expansion. Later, we also launched a fund that aims to support the transformation of startups in Southern Europe and Latin America.