Corporate venturing typically involves a minority investment in an early-stage company by a larger corporation. Corporate venture capital, or CVC, transactions often represent strategic opportunities for these large companies to leverage cash to support their existing products and services, or expand their businesses (particularly in relation to innovative technologies), by investing in and forming alliances with startups in a manner that spreads risk for the corporate venturer and provides potential upside for both parties. Companies may look to strategic CVC transactions as a supplement or alternative to internal research and development activity because these minority investments can involve lower costs and risk, while startups may value securing a commercial ally in addition to a source of funding. The following explores some of the key current trends relating to CVC transactions.
CVC Activity Continues to Grow. The popularity of corporate venturing continues to grow, both in terms of dollars invested and number of deals, with 2017 activity reaching the highest levels in the last five years. The average size of corporate venturing investments is growing as well, with record investments such as the $1 billion investment in Lyft Inc. led by Alphabet’s CapitalG in October 2017. In addition, CVC transactions continue to expand across numerous industries and geographies.
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