corporate venture capital investments (CVC) now represent more than a fifth of the global company. The largest slice of the funding pie comes when founders have to navigate a more uncertain capital landscape. Amid the Ukrainian conflict and rising inflation, with many investors becoming more cautious with their dollars, startups are welcoming the long-term stability that business can offer.
Corporate knowledge, R&D resources, M&A opportunities, and networks are invaluable to early-stage companies. But many traditional investors have strong views on corporate venture capital projects, arguing that the role of corporations is to buy, not take back, other companies. This approach, however, overlooks the benefits of corporate investment, especially in times of shrinking capital flows and more cautious investors.
I have been working in corporate venture capital for seven years and teach a master’s degree on CVC at the Madrid Bar Association. This is why corporate investment is making a comeback and what startups should be looking for in return.
Corporate investment arms have gotten stronger
While few corporations used to offer investment in startups (and those that did were primarily concerned with software), virtually every company is involved in venture capital today, covering a variety of niche sectors. That means there is more corporate money and players for startups to explore.
Corporations have also realized the potential for a more open innovation strategy, in which they invest in ideas from outside start-ups rather than just experimenting internally. This shift is why so many companies have investment funds dedicated specifically to startups – just look at Mondelez International (formerly Kraft), Nike, Microsoft, American Express, and PepsiCo.
With the combination of capital and expertise, corporations can execute strong startup deals and deliver value faster.
These branches not only allocate funds and tools for startups to grow, but also provide them with decades of investment experience. With the combination of capital and expertise, corporations can execute strong startup deals and deliver value faster.
And despite their size, corporations can be surprisingly agile. Over the past decade, most have reacted to and reflected changes in the startup space, which have helped raise the bar for CVC investments. At Wayra, we have adapted our strategy multiple times to ensure we evolve as the startup ecosystem does. In 2018, we transitioned from an accelerator to a CVC to better assist more mature startups with scaling and joint venture opportunities. Subsequently, we also launched a fund aimed at supporting the transformation of startups in southern Europe and Latin America.