Dec 23, 2023
Amidst financial crises, corporate venture capital (CVC) has shown impressive strength, with a substantial percentage of US VC rounds last year including CVC investors, as per PitchBook. Gadinsider explores the fundamental aspects of corporate venture capital and its divergences from conventional venture capital.
Venture capital involves investing funds into emerging companies or small businesses in exchange for equity. While conventional VC firms pursue high profits, CVC firms function within large established companies and have a wider perspective. They aim to attain competitive benefits, such as specialised industry insights, access to new markets, prospects of innovation, advancement in technology, and obtaining fresh assets.
Unlike conventional VCs, corporate venture capital teams are not merely looking for financial gain opportunities; they give priority to opportunities that are in with their parent organization's objectives. By staying ahead of industry changes, CVC firms contribute to parent companies' goals such as maximising their profits and expanding their product or service range.
The report highlighted that CVC share is inflating with time. Some 26.2% of US VC deals last year included CVC investors, marking a historic high for CVC's participation in VC deals. While conventional venture capital (VC) focuses on financial gains, corporate venture capital is interested in strategic goals, making it a convincing method for big companies looking to gain a competitive edge in ever-evolving marketplaces.
