Venture Capitalism

Corporate VC Funding Plummets by 30 Percent—Except for Internet Investing

CVCs no longer “partying like it’s 1999,” report says.
cvc graph 31 Corporate VC Funding Plummets by 30 Percent—Except for Internet Investing

(cbinsights.com)

News flash: it is not 1999 anymore, and it appears that corporate venture capitalists have adjusted accordingly. CB Insights released its Q1 Corporate Venture Capital Report yesterday, revealing that CVCs participated in just 84 deals totaling $1.09 billion, a record low for the past five quarters.

But while overall CVC funding is down 20 percent, funding for the Internet sector is up 30 percent, with CVC deals in that sector increasing for the third straight quarter.

Corporate venture capital refers to the direct investment of corporate funds into external startups—as opposed to corporate venturing, which involves internal innovation support. For example, AOL Ventures, the venture capital arm of AOL, which invested in TastemakerX last quarter, and Time Warner Investments, which made deals with Conviva and Bluefin Labs this spring.

CB Insights analyzed data on the activity of over 200 corporate venture capital arms, concluding that corporate deal and funding volume continue to fall. CVCs participated in only 11 percent of all venture deals for the first quarter. CVC funding in the mobile and telecom sector fell 45 percent from last quarter, although CB insights expects to see an increase in Q2’12. Corporate funding for the green sector is also at a five quarter low.

The report found that when CVCs do invest, they tend to be involved in larger deals. According to CB Insights, CVCs spent, on average, $5.5 million more per deal than traditional VCs in Q1 2012.

CVCs were also found to be later stage investors—only 32 percent of all CVC deals were early stage investments in Q1 2012—as well as frequent co-investors. The average CVC deal in Q1 had 4.3 investors, and over 90 percent of CVC deals involved at least one co-investor.

Findings revealed that CVC activity in New York and Massachusetts has fallen for the fourth consecutive quarter, with Texas nearly overtaking New York for the third place spot. California remains in the lead, having received 60 percent of national corporate funding in Q1.

“CVCs are not partying like it’s 1999,” concluded CB Insights CEO and co-founder Anand Sanwal.