Corporate VC on the rise, but traditional organizational structures prevail


Corporate participation in venture capital hit a more than decade-long peak in the first half of this year, with nearly 11% of investment dollars in startups coming from corporate programs.

This uptick should come as no surprise to keen observers of the industry. Reconstituted and fortified corporate venture organizations have been on the rise in recent years. Only 12.3% of venture deals had a corporate syndicate member in the first quarter of 2010. Participation hit 15.9% in this year’s second quarter, according to data from the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters (publisher of VCJ).

What’s discouraging is that many of these programs still are structured in a traditional manner and likely subject to the whims of the corporate chieftains.

Clearly, many experienced investors have crossed the chasm from venture to corporate venture as jobs shift from a shrinking business to a growing one. This is an encouraging sign.

According to a June survey of 60 corporate venture arms, less than half of the unit heads and executives—42% to be exact—had been in their roles for less than two years. What’s more, well over half of the organizations polled reported that less than 50% of their teams came from inside their corporate parents. This points to the potential for outsiders to bring new consistency to typically flighty programs.

However, the survey, sponsored by the Corporate Venture and Innovation Initiative, which includes companies such as Bell Mason Group, DLA Piper and Silicon Valley Bank, found that corporations continue to structure their venture arms in traditional ways. More than a third of the organizations still rely on annual allotments from their corporate parents, and more than a quarter obtain funds on a case-by-case basis.

Only 11% have separate venture entities with multi-year funding, the survey found.

This story first appeared in Reuters Venture Capital Journal. Subscribers can read the original story here. To subscribe to VCJ, please email [email protected].

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