Corporate venture capital investments (CVCs) now represent more than a fifth of global venture. The bigger slice of the funding pie comes as founders have to navigate a more uncertain capital landscape. Amid the Ukrainian conflict and rising inflation — with many investors being more cautious with their dollars — startups are welcoming the longer-term stability that corporates can offer.
Corporate knowledge, R&D resources, M&A opportunities and networks are invaluable for early-stage companies. But many traditional investors have strong opinions about corporate venture capital projects, claiming that corporates’ role is to buy, not back, other companies. This approach, however, overlooks the benefits of corporate investment, especially in times of dwindling capital flows and more cautious investors.
I’ve worked in corporate venture capital for seven years and teach a master’s class about CVC at the Madrid Bar Association. This is why corporate investment is making a comeback — and what startups should look for in the return.
Corporate investment arms have gotten stronger
While few corporates used to offer startup investment (and the ones that did were primarily concerned with software, practically every corporate is involved in VC today and covers a range of niche sectors. That means there’s more corporate money and players for startups to explore.
Corporations have also come to realize the potential of a more open innovation strategy, where they invest in external startup ideas rather than only experimenting internally. This shift is why many corporates have investment funds specifically dedicated to startups — just look at Mondelez International (formerly Kraft), Nike, Microsoft, American Express and PepsiCo.
With the combination of capital and expertise, corporates can execute strong startup deals and deliver value to them faster.
These branches not only assign funds and tools to startups’ growth — they supply startups with decades of investment experience. With the combination of capital and expertise, corporates can execute strong startup deals and deliver value to them faster.
And, despite their size, corporations can be surprisingly agile. In the past decade, the majority have reacted to and mirrored changes in the startup space, helping to raise the bar for CVC investments. At Wayra, we’ve adapted our strategy a number of times to ensure that we evolve as the startup ecosystem does. In 2018, we moved away from being an accelerator to a CVC to better help more mature startups with joint-venture opportunities and scaling. Later, we also launched a fund aimed at supporting startups’ transformation in Southern Europe and Latin America.