Corporate Venture Groups Participated in 23.5% of Deals and Accounted for 20.6% of Dollars Deployed in First Quarter
WASHINGTON, DC – Corporate venture groups deployed over $2.5 billion in 228 deals to the entrepreneurial ecosystem in the first quarter of 2016, according to the MoneyTree™ Report by PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. The percentage of deals with corporate venture participation has risen for nine straight quarters, reaching 23.5 percent of all venture capital deals during the first three months of the year, which marks the highest level since Q3 2008 when corporate venture groups were involved in 24.1 percent of deals. By dollars invested, corporate venture represented 20.6 percent of venture capital invested for the first quarter, marking the strongest three month period for corporate venture dollars deployed in the history of the MoneyTree Report.
“As is evident by their continued investment activity, corporations are increasingly engaging in a more meaningful way with startup founders and the broader entrepreneurial ecosystem,” said Bobby Franklin, President and CEO of NVCA. “More and more corporations are choosing to launch venture units because they understand how important it is to keep their finger on the pulse of innovation. The benefits of this deeper engagement accrue not only to the parent corporations but also the startups as they draw on the knowledge, expertise and networks of the parent corporations to scale and grow.”
Sector Analysis
In keeping with overall investment trends, software companies continue to be the beneficiaries of increased corporate venture activity, receiving $1.2 billion in 92 deals, representing 50 percent of corporate venture dollars deployed and over 40 percent of deals. Within the software sector, one-quarter of all venture deals had corporate venture participation. Compared to overall venture investment trends by sector, corporate venture groups were over-weighted in the software sector.
Biotechnology companies received the second largest amount of corporate venture dollars in the first quarter, attracting $320 million in 32 deals, representing 12.8 percent of corporate venture dollars invested and 14.0 percent of deals. As a share of overall venture investing in biotechnology companies, corporate venture groups accounted for 17.8 percent of total dollars invested, which was slightly under-weighted compared to overall venture investment.
Computers and peripherals companies received the third largest amount of corporate venture dollars in the first quarter, drawing $306.3 million into four deals with the majority of those dollars invested in a single company as part of a $793.5 million deal. By dollars, this represented 12.2 percent of all corporate venture dollars deployed and 1.8 percent of deals. Compared to overall investment trends, corporate venture investment into computers and peripherals companies was over-weighted.
Stage of Investment Analysis
During the first three months of the year, corporate venture groups were more active in investing in companies at the seed stage than they were in 2015, deploying $89.2 million to seed stage companies through 14 deals. This represents 3.6 percent of all corporate venture dollars invested and 6.1 percent of all deals involving corporate venture investors. Early stage companies attracted the majority of corporate venture dollars, with $977.2 million invested in 102 deals, totaling 39.1 percent of corporate venture dollars deployed and 44.7 percent of deals with corporate venture participation.
Looking at investment into startups farther along in their grown cycles, corporate venture was under-weighed in expansion stage investment and over-weighted in later stage investment as compared to overall venture investment trends. Corporate venture groups invested $505.5 million across 77 deals into expansion stage companies and $929.3 million across 35 deals into later stage companies.
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