Resurgence in Corporate Venture Capital

Corporate Innovation programs have been around from the dawn of time. The different forms come and go like any other fade. Corporate Venture Capital (CVC) started in the 1960-70s with the rise of the technology curve, companies needed a way to access new ideas.

However, CVC activity slowed down during the dot-com crash in the early 2000s. It was not until the mid-2000s that CVC activity picked up again, and since then, it has become increasingly popular. In recent years, there has been a surge in CVC activity, with more and more companies establishing their own venture capital arms or partnering with existing venture capital firms to invest in.

Today, CVC investing is prevalent in across many industries, including technology, healthcare, and consumer goods, and they are an important source of funding for many startups. How successful each is varies tremendously and depends on many factors.

Brief History of Innovation Trends

1940-1950s R&D

Research and Development (R&D) departments established in many companies to support product development and innovation.

1960-70s Corporate Venture Capital

Corporate venture capital (CVC) emerges as a way for corporations to invest in startups and gain access to new technologies and ideas.

1980s Open Innovation

The concept of open innovation is introduced by Henry Chesbrough, which encourages companies to look beyond their own R&D departments and collaborate with external partners.

1990s Incubators

Business incubators and accelerators gain popularity as a way to support early-stage startups and foster innovation.

2000s Crowdsourcing

Crowdsourcing and open source innovation become more common, allowing companies to tap into the collective knowledge and creativity of a larger community.

2010s Innovation Labs

Corporate innovation labs and startup accelerators become more common, as companies look to stay ahead of disruption and find new growth opportunities.

2020s Digital Transformation

With the rise of digital transformation, companies are increasingly investing in emerging technologies like artificial intelligence, blockchain, and the internet of things to drive innovation and stay competitive.

"Corporate venture capital has become an essential tool for companies that want to stay relevant and competitive in today's fast-paced business environment. By investing in startups, we can tap into new technologies and business models, while also providing entrepreneurs with the resources they need to grow and succeed." Mary Barra, CEO of General Motors.

Here are the top 10 reasons CVC will continue to be with us for the foreseeable future.

1. Increased Investment Activity: CVC investment activity has been on the rise in recent years, with a record $73.3 billion invested globally in 2021,
   

2. Focus on ESG: There has been a growing focus on environmental, social, and governance (ESG) investing in CVC, with many companies looking to invest in startups that align with their sustainability goals.
   

3. Diversity and Inclusion: CVC firms are increasingly seeking to invest in diverse founders and startups that promote diversity and inclusion.
   

4. Health and Wellness: There has been an increased focus on health and wellness in CVC, with many companies investing in startups that focus on digital health, wellness, and fitness.
   

5. AI and Automation: CVC investment in artificial intelligence (AI) and automation technologies has been on the rise, with many companies looking to invest in startups that can help automate and streamline their operations.
   

6. Fintech and Insurtech: There has been a growing interest in fintech and insurtech startups, with many CVC firms investing in companies that are developing innovative financial products and services.
   

7. Collaboration with Startups: Many CVC firms are partnering with startups to co-develop products, share resources, and collaborate on research and development.
   

8. Focus on Early Stage Investments: CVC firms are increasingly focusing on early-stage startups, with many looking to invest in seed and Series A rounds, acting very much like traditional venture capitalists.
   

9. Impact Investing: There has been an increased focus on impact investing in CVC, with many companies looking to invest in startups that have a positive social or environmental impact.
   

10. Global Expansion: CVC firms are increasingly investing globally, with many looking to invest in startups in emerging markets such as Asia and Africa.

Overall, CVC has become popular today because it provides established companies with a way to stay competitive in a rapidly changing business environment by accessing new technologies and innovative business models, while also providing attractive financial returns and other strategic benefits.

However, due to inherent differences between corporations and traditional VCs, not all CVCs are performing as well as they should and there are numerous factors that contribute to how well they perform. We will look at why some are more successful than others in other articles.