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Venture Capital

Corporate VCs keep writing checks as other ‘tourists’ cool on startups

CVCs were involved in more than a quarter of US VC deals in 2022, the highest participation rate this decade.

Corporate venture firms are staying the course on VC investing, even as asset managers, private equity firms and others are taking a more cautious approach.

CVCs have participated in more than a quarter of US VC deals in 2022, the highest rate this decade, according to our latest PitchBook-NVCA Venture Monitor. Meanwhile, the participation rate for all other kinds of nontraditional investors has fallen.

 

“The CVCs we work with are as active as ever,” said Neal Hansch, CEO of Silicon Foundry, which advises corporate VC arms.

In recent years, corporates have cast aside their reputation as “tourist” investors—a moniker that implies a tendency to flee in difficult markets—and are increasingly seen as a core source of VC capital. Three in four CVC leaders don’t anticipate a pullback in investment activity, according to a recent survey by Silicon Valley Bank and Counterpart Ventures.

As their VC strategies have matured, senior managers at corporations increasingly see startup investing as a long-term commitment, Hansch said. In addition to producing financial returns, CVC firms use venture investing to create a pipeline of future acquisitions and to take advantage of emerging technologies.

Corporate VCs also tend to invest earlier than other types of nontraditional investors, and those early-stage deals are less affected by stock market gyrations. Still, rising interest rates will put pressure on balance sheets, thus affecting the cash available to CVCs that don’t invest out of dedicated funds.

The declining activity of PE firms and asset managers has already started to have an impact on valuations as well as capital invested in late-stage VC-backed companies. PitchBook data shows that 87% of mega-deals last year included nontraditional investor participation, which underscores the importance of these investors to late-stage startups.

Featured image by Icatnews/Shutterstock

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