What do Anheuser-Busch, General Motors, and Bayer have in common?
If you guessed: They all have in-house VC arms, you win a point.
Corporate venture capital, or CVC, is a bridge between the public and private markets. The funds vary radically in size, structure, and objectives. And though a lot of the big names you might expect have CVCs (take, for instance, Samsung or Toyota), there are also a range of more unexpected companies with venture operations—7-Eleven, Allstate, and Home Depot all have their own venture arms.
While tech companies like Alphabet, Salesforce, and Intel have historically been among the most prominent players in corporate venture, it’s become increasingly de rigueur across many industries and there are a lot more CVCs today than there used to be. Some reports estimate that there are as many as 2,000 CVCs, up from several hundred in 2021.
“More than 70 new CVC units started in 2023, and the number of corporate venture capital organizations grew 10x over the last decade,” said Sneha Shah, EVP and head of new business ventures at SEI, via email.
So CVCs are more ubiquitous than you might have guessed—about one-third of venture-backed companies have a CVC on their cap table, according to data from Counterpart Ventures. They also account for more than 50% of deal value, per PitchBook data from Q1 2024. The AI boom is now bringing even more attention to the sector, as large tech companies make strategic investments in AI startups.
“I don’t want to say it’s the only thing of course, but AI is absolutely a key driver,” says Patrick Eggen, founding general partner at Counterpart Ventures. “Look at the Anthropic deals, look at OpenAI, look at Hugging Face—they all have massive corporate involvement.”
Still, according to Eggen, who was previously the managing director of Qualcomm Ventures North America, it’s not all rainbows and unicorns in CVC land. The environment for CVCs, Eggen says, is actually kind of mixed right now—some CVCs are dialing back investments, while others are doubling down.
“CVC can be the ultimate platform, but it has to be done right,” Eggen says. The big mistake that many CVCs make is to be overly dependent on their corporate parents. To make solid venture investments, a CVC needs to be able to think and act independently of the more entrenched ideas that a parent company might have. And though returning capital is important, it’s not the only thing that matters—large companies also expect strategic gains, whether that’s new technology or a new product geared towards the company’s customers.
“CVCs have to show strategic dividends beyond making money,” said Eggen. “The top decile…if they embrace independence, carried interest, that’s how they have that freedom to flourish for ten years.”
As interest rates remain high and economic volatility persists, a corporate parent supporting a CVC right now might be hesitant to experiment or take risks, especially if that CVC was formed in the 2021 run-up.
Does that mean a shakeout is coming for the CVC sector? Maybe. But for the corporate investors that have been in the game for a while, the game will remain the game.
“I’m expecting the market to continue improving,” said Matt Sueoka, global head of Amex Ventures. “It might be relatively slow. While some VC firms or other CVCs that came to be in the last few years may not be active, or may not be continuing, you’re still seeing a lot of experienced fund managers raising really large funds.”
An IPO dispatch… Ibotta, a digital marketing software provider, shares rose 17% in its public markets debut, with the company raising $577 million in its IPO.
See you Monday,
Allie Garfinkle
Twitter: @agarfinks
Email: [email protected]
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Joe Abrams curated the deals section of today’s newsletter.
VENTURE DEALS
- Ramp, a New York City-based fintech platform focused on corporate cards and expenses, closed a $150 million Series D-2 round. Khosla Ventures and Founders Fund led the round, with participation from new investors Sequoia Capital, Greylock, and 8VC.
- NeuBird, a San Mateo, Calif.-based developer of AI software designed to help IT, DevOps, and site reliability ops teams identify and resolve software and infrastructure issues, raised $22 million in seed funding from Mayfield.
- Xfactor.io, a San Francisco, Calif.-based AI-powered revenue platform designed for B2B organizations, raised $16 million in Series A funding. Accel and Xfactor.io CEO and founder Mike Carpenter led the round and was joined by Lightspeed and others.
- Clazar, a San Francisco-based platform designed to help software businesses sell on cloud marketplaces like Amazon Web Services and Azure, raised $10 million in Series A funding. Ridge Ventures and Ensemble VC led the round, with participation from Saurabh Gupta, Managing Partner at DST Global, and existing investors The General Partnership and Twin Ventures.
- The Rights, a Montclair, N.J.-based music sync clearance platform, raised $7.5 million in funding from Spyglass Media Group, Endeavor Entertainment, Borderless Capital, Algorand, Grit Capital Partners, and others. The company was created out of a recent merger between The Rights and Dequency.
- Usual Labs, a Paris, France-based DeFi startup and developer of the USD0 stablecoin, raised $7 million in funding. IOSG Ventures and Kraken Ventures led the round and was joined by GSR, Mantle, StarkWare, Flowdesk, Avid3, and others.
- Momentick, a Tel Aviv-based emissions data platform, raised $6.5 million in seed funding. Chartered Group Japan and TAU Ventures led the round and were joined by others.
- Diagon, a San Francisco, Calif.-based sourcing platform for manufacturing equipment, raised $5.1 million in seed funding. The Westly Group led the round and was joined by Valia Ventures, Techstars, Foster Ventures, Foxe Capital, Anthemis Group, and others.
PRIVATE EQUITY
- Meet The People, backed by Innovatus Capital Partners, acquired True Independent Holdings, a Columbia, Mo.-based media marketing group and owner of the True Media, Coegi, and RADaR media agencies. Financial terms were not disclosed.
- Precision Pipeline, backed by MPE Partners, acquired SabCon Underground, a Winter Haven, Fla.-based provider of repair, installation, and maintenance services for natural gas companies. Financial terms were not disclosed.
EXITS
- Incline Equity Partners acquired a minority stake in VMG Health, a Dallas, Texas-based health care advisory firm, from Northlane Capital Partners. Financial terms were not disclosed.
IPOS
- Loar Holdings, a White Plain, N.Y.-based manufacturer of niche components for aircraft and aerospace and defense systems, plans to raise up to $286 million in an offering of 11 million shares priced between $24 and $26 on the New York Stock Exchange. The company posted $317 million in revenue for the year ending December 31, 2023. Abrams Capital Management, GPV Loar, Blackstone Alternative Credit Advisors, Dirkson Charles, and Brett Milgrim back the company.
- Centuri Holdings, a Phoenix, Ariz.-based provider of infrastructure services to energy and utility firms, raised $260 million in an offering of 12.4 million shares priced at $21 on the New York Stock Exchange. The company posted $2.9 billion in revenue for the year ending December 31, 2023.
PEOPLE
- Arsenal Capital Partners, a New York City-based private equity firm, hired Raymond H. Hill as an operating partner. Formerly, he served as chairman and CEO of CorEvitas.
- Headline, a San Francisco-based venture capital firm, promoted Taylor Brandt and Jacob Conger to principals.
- One Rock Capital Partners, a New York City-based private equity firm, hired Sudeep Shetty as an operating partner. Formerly, he served as chief information & transformation officer at Britvic Soft Drinks.
- Performance Equity Management, a Greenwich, Conn.-based private equity investment firm, hired Anita Sonawane as a principal and Sarah Condon as a senior associate. Formerly, Sonawane was with Bessemer Trust and Condon was with Goldman Sachs.
- Permira, a London, U.K.-based private equity firm, hired Steve Goldberg as an executive in residence. Formerly, he served as chief revenue officer at Salesloft.
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