This article reviews the rise and implications of CVCs (Corporate Venture Capitalists) – a subset of the VC community comprised of large companies that invest in ventures in a systematic manner that they view as a component in a corporate strategy. It lays out the special attributes of these investors, which are different from other types of venture capitalists: corporate venture capitalists – such as Pfizer Ventures and BMW i Ventures – are unique in their interest in non-financial return on investment and the depth and breadth of services they can bring to the companies they invest in.
Prof. Dushnitsky takes a historical view and outlines four distinct waves in the history of CVCs from the 1960s to the present.
- The mid-1960s saw many American corporations start CVC programs, but this wave crashed after the oil crisis and related macroeconomic changes in the 1970s.
- The 1980s saw CVC energized again due to the growth in tech-driven opportunities and increased legislative flexibility. This time it was the 1987 market crash that reversed the growth of CVC.
- The 1990s experienced an explosive growth in Internet-related ventures, leading to a wave of CVC activity that stalled with the 2000 crisis in the public markets.
- The recent wave started in the mid-2000s and involves a wide range of sectors and geographies, the establishment of longer-lived CVC programs than before, and a serious increase in the extent of investment – for instance, US$12.31 billion in 2014 in the United States alone.
Corporate VC is having an impact on the innovation and venture ecosystems. It has the means and motivation to invest in Deep Innovation ventures (those stemming from basic research breakthroughs and requiring substantial resources and more than 10 years to materialize); it has the resources and know-how to help bridge the chasm between science and commercial product; and it can help integrate entrepreneurial hubs across global geographies.
Appeared in CVR Issue 2 – History of Venture
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