In 2019 the global CVC-backed fundings reached a record high of 57 $B. However, since 1914 a lot has changed in the world, and Corporate Venture Capital has gained popularity, especially in the last five years, where global CVC-backed fundings and deals have tripled. Du Pont's company invested in General Motors and set the foundation for Corporate Venture Capital (CVC). How Corporate Venture Capital appearedĬorporate Venture Capital - also known as Corporate Venturing - has already been around for over 100 years. Venture Capitalists play an essential role in keeping the economic ecosystems alive and foster change and innovation. Venture capital is an important source to get money for young companies, which have limited operating history and, therefore, limited access to bank loans or other debt instruments. The returns to the venture capitalists naturally depend upon the growth of the company. However, in case of success, those investments are capable of giving impressive returns. Such investments are by design very risky because investors have little protection if the young company fails, and the failure rate is very high. This is the so-called "pre-money" valuation). (That means the startup is worth 5 million euros before the investment. In return for their capital, the venture capitalists receive an equity stake in the company, e.g., they invest 1 million Euros for 20% of the startup's ownership. In the latter case, the invested money is called venture capital, and the investors are called venture capitalists. Private individuals or business entities like to invest their capital in different ways, e.g., in bonds, publicly offered companies (stocks), and startups. In this post, we explain the basics of Corporate Venture Capital and the main differences between Venture Capital and Corporate Venture Capital. To successfully invest, it is crucial to command the necessary know-how, consider organizational aspects, and follow some simple investment rules. Throughout the last years, Corporate Venturing and Venture Capital have gained popularity throughout all industries and more investors were able to find success through such investments. It demonstrates the great skepticism by corporates concerning minority investments. This quote from Fred Wilson, an American businessman, and investor, is by now notoriously famous. I think corporations should buy companies.
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