Corporate Venture Rides Again


In order to make this as interactive as possible, I wanted to spark some conversation around some of the areas of focus that our firm works on a day-to-day basis. As an introduction, Collective IQ focuses on four main areas: Private equity, corporate venture, corporate advisory, and portfolio companies.

To start the ball rolling, in corporate venture, we work (and have close relationships) with a number of corporations in their business development, M&A, strategic investment, and external partnership groups (loosely defined as corporate venture) and what is interesting is that, as with any area of private equity, there is always someone anywhere along the life cycle – someone forming a corporate venture group; someone managing their corporate venture group or someone exiting their corporate venture group.  Given that, where does the overall market seem to be currently?

The National Venture Capital Association released data that shows that corporate venture investing accounted for 27% of all deals in 2000, dropping to 16% in 2003.  In 2005, corporate investors represented 19% of deals.

It appears that this trend is continuing and I believe it is because companies are looking for ways to grow, quickly and inexpensively – with extra emphasis on inexpensively over the past few years.  Externalizing R&D through strategic minority investments, which is probably the most common form of corporate venture, is always compelling as companies want to diversify their R&D budget and/or cherry pick their M&A strategy from their corporate venture portfolio (or from intelligence gained by their corporate venture group).  Being able to make a minority investment in a portfolio of emerging opportunities gives the corporation insights into areas without having to empty the R&D coffers on internal skunk works.

So, as with companies such as Adobe, Micron, Sprint Nextel and others, there seems to be a resurgence of companies adding to their corporate venture structure (be it external or internal) to complement their growth strategy.

Naveed Khan of the Strategic Venture Association (www.strategicventureassociation.com) has made the following observations recently about the trends in corporate venture activities:

– M&A as the growth vehicle – corporate venture groups have been more actively focused on acquiring another company rather than early-stage venture deals

– Corporate spin-outs – companies continue to streamline their strategies and concentrate on their core activities and have used their corporate venture group to assist with spinning out good, but non-core, technologies or businesses.

– Venture investing via targeted funds – rather than running their own venture funds, some companies have engaged with professional VCs and created very specific funds that are sort of co-managed and done in tandem with internal R&D efforts, lessening the internal administrative burdens of managing a large portfolio

– University innovation – most corporate venture groups have a team focused on sourcing deals from University research centers

Interestingly, however, we have also gotten a number of calls over the past year from groups wanting to spin-out or disband their corporate venture programs, as well…another thought for another day.

As a further introduction, Collective IQ focuses on four main areas:  private equity, corporate venture, corporate advisory, and portfolio companies.  Specifically, some of the niche areas that we focus on are:

Corporate venture – across the life cycle of corporate venture by helping corporations with program formation/development; portfolio management; and/or liquidity or spin-out of their programs.

Private equity – in this perspective, largely we have been involved with the creation of niche firms across the spectrum of private equity:  venture debt, venture capital, growth, buyout, fund-of-funds and structured products.

Corporations – in both corporate advisory and with our portfolio companies, we assist in ramping the growth of the companies through business development and other strategic relationships – for both marquis clients and emerging companies

Other – in theme with our niche focus, we have the “in” on unique alternative assets such as media assets, IP portfolios, and others

So, I look forward to sharing more in these various areas of the alternative assets space and encourage your insights and feedback.