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Benchmarking Corporate Venture Capital

Learn about the major trends, biggest investments, and key players in Corporate Venture Capital. 

QUANTIFYING CORPORATE VC WITHIN VENTURE

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Below is a transcript of our Webinar, Trends in CVC, led by CB Insights Analyst, Kerry Wu.


So we'll set the stage by running through the high-level trends in CVC in terms of overall funding and deal activity. We'll start with global numbers followed by a section dedicated to US start-up funding. So when we think about the modern corporate VC ecosystem, it's clear that corporates are taking private investments more seriously than they ever have before. And this quote from Karen Gryga just a few weeks ago, really sums up that trend, especially in the sense that corporate VC is a manifestation not just of companies' desire for growth but also a need to defend against disruption and all the rapid innovation that many industries are facing today.


How does CVC measure up to the greater VC ecosystem?


So now that we have a good idea of the macro picture, let's see how CVC measures up in terms of the VC ecosystem as a whole. Let's dive into comparing CVC funding in the deals and arms against the overall VC numbers that you're seeing in blue. So peeling this back shows that corporate VC hasn't just risen alongside institutional VC, it's actually making up a greater share of the VC ecosystem than it has before. And CVCs were only in about 16% of deals in 2013 but that's up to almost a fifth of deals now.

 

And we can see how diverse the CVC landscape has become. Of course, you have some of the more well-established players in tech and healthcare. There's also venture arms coming in from telecom, from financial services and media, and that's just a fraction of the landscape today. We're still watching this trend continue, and recently we especially started seeing CVCs entering the ecosystem from more non-traditional industries. We've got big industrials like Caterpillar start making private investment. And so far in 2016, we've already seen Airbus and jetBlue launching venture arms and some different segments of CPG as well. Burt's Bees, Campbell Soup and even Sesame Street announced last month that it's going to help fund startups for children's development. And what you're going to see in the slides to come is a lot of great data that reflects this Cambrian explosion in new CVCs and funding activity.

 

So looking at the overall numbers for 2015, we really had a record year in terms of activity on the global scale. Last year CVCs were participating in over $28 billion in funding across 1300 deals. And in the third quarter especially, we saw CVCs jumping into those billion plus mega rounds, going to Unicorns like Didi Kuaidi and social finance. But there's a big drop-off in the last quarter where TVC funding dollars really pulled back and deal count was dropping to a two-year low. 


And this pullback really goes hand-in-hand with what we're seeing in the VC space as a whole. Now in terms of geography, the majority of corporate venture deals are still being deployed in North America. But what you can see is that North American share there in blue has been shrinking throughout the year. We saw more corporate venture deals going to both Asia and Europe. So these are geographies that both have been picking up steam. And Asia is firmly in the second place now with Europe coming in third.


Now looking at the stage level activity, early stage deals fell off a bit in the first quarter, but CVCs came back in the market by year-end, and by early stage here we're just referring to seed and Series A rounds. Another interesting trend we saw is that Series D are later rounds, dropped from 14% in the first quarter to 10% in the fourth. So this correlates with that big funding drop off we're seeing in the fourth quarter as there are less of those late stage mega rounds pushing the numbers up. 


In terms of sector level trends, we see that internet has been going up and down but there's no question that it's still a top sector for CVC deals. On the other hand, mobile and telecom there in orange was taking a smaller share of deals as the year went on. Mobile just barely edged out healthcare as the second largest sector for 2015, so it will be interesting to see which of those sectors wins out in 2016.


So now let's dive into some of the data behind this CVC boom that we've been talking about. And here you can see the number of CVCs who've made an investment in each quarter since 2012. And you can tell right away that the number of active CVCs has been steadily rising. And we hit an all-time high of 185 CVCs making investment in the third quarter of last year. Now this next chart shows how many CVCs have been active each year, and this time specifically at the seed stage. 


So you can see this number has also jumped up. It's more than quadrupled in four years. So not only are there a record number of active CVCs, they're also not shying away from making those early stage investments. We have Google Ventures, Amazon's Alexa Fund, Bloomberg Data. And these are just some of a few of the big names that are in this group now.


We also did an analysis of the number of new CVCs by the year of their first investment. So the CVC boom is very evident here as well. We've got a record number of new corporate venture arms coming into the ecosystem every year. We had 85 CVCs making their first investment in 2015, including some big names like Twitter Ventures and Workday Ventures. And this is definitely a trend to watch, especially as we see more of those non-traditional venture arms coming into play. So out of all the CVCs that are now in the space, we take a look at who is the most active in 2015. Not surprisingly, Intel Capital and Google Ventures are coming out on top. Looking into Intel Capital specifically, it's notable that they are looking in markets all over the world. Last year, 32% of their investments went to companies that are based outside of the US. And of course, the big news lately is that Intel Capital maybe divesting part of its consumer type portfolio to refocus on its core strategic areas. So obviously, we're very interested to see if this comes to pass. Because if it does, that'll be a major shift in Intel strategy.



We also did an analysis of the number of new CVCs by the year of their first investment. So the CVC boom is very evident here as well. We've got a record number of new corporate venture arms coming into the ecosystem every year. We had 85 CVCs making their first investment in 2015, including some big names like Twitter Ventures and Workday Ventures. And this is definitely a trend to watch, especially as we see more of those non-traditional venture arms coming into play. So out of all the CVCs that are now in the space, we take a look at who is the most active in 2015. Not surprisingly, Intel Capital and Google Ventures are coming out on top. Looking into Intel Capital specifically, it's notable that they are looking in markets all over the world. Last year, 32% of their investments went to companies that are based outside of the US. And of course, the big news lately is that Intel Capital maybe divesting part of its consumer type portfolio to refocus on its core strategic areas. So obviously, we're very interested to see if this comes to pass. Because if it does, that'll be a major shift in Intel strategy.


So apart from CVC activity specifically, we also wanted to point out that corporate themselves are also investing a lot of dollars directly into VC-backed startups. You'll notice in the past few quarters that corporates are almost matching CVCs in terms of funding participation. You can see them in the dark blue and the dark orange here. Chinese companies like Tencent and Alibaba have been the most active, and overall we see corporates also becoming a bigger force in private markets. 



Now that we've gone through some high-level global trends, let's take a brief look into some other major markets before we get into the US. Starting with the UK we've seen a pretty dramatic rise in CVC activity here as well. Funding dollars have jumped up 8x since 2011. And we saw two big CVC rounds last year in July when one of these was going to O3B Networks, which is a satellite provider, and the other went to the oncology company Immunocore.


COUNTRY RECAPS: UK, CHINA, AND INDIA

In China, CVC deals and dollars were also up for the year. And here's where we really saw corporate ventures taking part in those big mega deals. We had $850 million going to Dianping, a $2 billion funding round going to Didi Kuaidi. And these are just some of the deals that are pushing the funding numbers up. 


And finally looking at India, this stood out a little bit because it was the one market where CVCs actually pulled back a bit in 2015. And we saw a strong third quarter but the majority of funding that you see there is coming from two big investments in Pepperfry and Practo. And even in those cases, those rounds were about $100 million apiece. So the top CVC deals in India are a bit smaller than what we're seeing in those other markets. 


So breaking down the most active investors in these three countries, we see a couple of names popping up across the different markets. Qualcomm is in all three of these tables. We have Intel leading in China and in India. And that just goes back to how diverse Intel's portfolio is outside of the US.


CORPORATE VENTURE INVESTMENT IN THE US

Macro trends in CVC funding to US-based startups


Okay, so let's break down some of these macro trends in CVC for US-based startups now. With overall financing, we see that the US trends are directionally in line with what we're seeing globally. And we also have records here in terms of CVC activity. But although funding dollars were up 33% from bigger deal sizes, deal growth was only up about two percent for the year. And you can see that fourth-quarter slowdown was especially sharp here in the US. 

 

In terms of geography, CVCs are still doing over half of their deals to startups in California. But they're also actively doing deals in New York and Massachusetts. And these two were going back and forth a bit for the year and they ended up basically tied as the second place market in the US. So we'll definitely keep an eye on this to see which state has more momentum going into the new year. Looking at the stage breakdown you'll see that in the US, CVCs are a bit more active at the mid-stage. 

 

You can see that Series D deal share in green rising throughout 2015. CVCs are also doing less at the seed stage in the States. Typically we're seeing less than a fifth of deals at seed per quarter here. CVCs are also focusing on internet deals in the US, especially in the fourth quarter. Mobile started off the year strong but here it's also dropping off as the year goes on. And if you look at 2015 as a whole, healthcare actually comes in second place by a few percentage points. Mobile and healthcare have been pretty uneven, though, so we'll have to monitor this trend to see which of those wins out in 2016.


To close out the macro piece, we also ranked the most active CVCs based only on their US company investments. And here we have Google Ventures bumping Intel down, which makes sense given how they mostly concentrate on the US. I should note that the establishing European fund that now has a separate pool of capital but that fund's been a little slow to get off the ground. Elsewhere in the list, we see other names like Comcast, Samsung and CISCO popping up as well. 

 

So here's a view showing that CVC deal share keeps growing larger. And we can see it's starting to edge up over 20% in some quarters, especially in that third quarter where corporate ventures were really making a lot of deals. And we know that many of you are interested in US market data as well. So taking that same view but just zooming in on CVC deals in the US, it's interesting that the share here is actually a few percentage points higher and going all the way up to 23% in that third quarter. 

  

So given that, we have that fourth quarter correction, we're interested to see how it shapes up going forward. This next chart shows how average CVC deal sizes are outpacing VC as a whole. And as we see CVCs jumping into those larger rounds, by now you notice the third quarter outliers is really a consistent theme. It's no different here as CVCs were in those big unicorn deals. And the fourth quarter correction applies to deal size here as well. 

  

And we had the CVC average coming back to around $21 million. Here we wanted to show that same chart except with the US market breakdown. You can see that CVC deals are also comfortably outpacing the VC average here in the States. But the third quarter is less extreme without those mega rounds of the Chinese startups, although the CVC average for US deals also ended up around $21 or $22 million by the end of the year.

  

Next, let's talk briefly on syndicates. So corporate ventures obviously aren't investing alone. They're doing many of their deals alongside traditional VC firms. And this table shows 20 VCs who have done the most deals with the corporate venture firms since 2011. We have some of the big well-funded dealmakers on top, Kleiner Perkins, NEA, Andreessen Horowitz and so on. 


Here we're taking a closer look at those top 20 VCs, this time, ranked by the share of their deals that they're doing with a corporate VC. OrbiMed is coming out on top here because they're doing a lot of investments alongside big pharma CVCs like Novartis Ventures and SR1. And going down the list we see that six VCs actually are doing, at least, a quarter of their deals with CVCs and 14 are doing, at least, a fifth of their deals with a corporate venture. So many of these institutional VCs are seeing corporate ventures coming to the table a lot more often.  


Now let's switch gears to look at funding trends in the top CVC sectors. So that's internet, mobile, and healthcare. We'll also look at a few investor graphs for other areas that are hot right now. So in terms of the internet sector, overall funding was strong for 2015. CVCs were in at least two dozen financings that were $100 million or more. Jet and Prosper and that's driving much of the growth that you're seeing here. That being said, we had deal count dropping for two 


WHERE CORPORATE VCS ARE INVESTING

Sector-level trends within CVC

straight quarters to end of the year. So it's worth watching to see if that softness is temporary or not.


We're still seeing a lot of the internet deals go to North America but there are signs that corporate ventures are looking to Asian internet startups a bit more. In the meantime, Europe has lost the bit of share there. Asian companies took about 25% of CVC deals in that last quarter. Peeling back the mobile sector, the big news is that CVCs have been pulling back here for a while now. In the last quarter, we actually saw the least CVC-backed mobile deals in over two years. And you see that third quarter sticking out. Again that's because we had three billion going to Didi Kuaidi alone. In terms of geo breakdown, North America, and Asia have been going back and forth a bit and with North America a bit less dominant than it was. One thing that's been consistent is there's been a ramp-up in Europe. CVCs were only doing nine percent of their deals in Europe the year before, but now it's up to 19% at the end of 2015.


The healthcare sector had less of those big funding trends than other sectors did but corporate ventures had a strong year in healthcare overall. CVCs were in at least one billion of funding every quarter throughout the year. And many of the big pharma CVCs like Lilly, Pfizer and Novartis have been keeping up their investment pace in this sector. Healthcare has been really focused on North America in the US but CVCs are ramping up a bit in Europe. You can see that green bar growing a bit towards the end of the year. 


On the other hand, Asia has really yet to emerge as a force for healthcare as it has for some of the other sectors.


Now we'll break out some different areas with investor charts from our CB Insights business social graph. So this is a great tool that's built into our analytics engine and it's a great way to visualize how different investors are linked by the private market bets they're making. So jumping right over from healthcare, here we've mapped out the activity of the big pharma companies. And what stands out here is that many of the companies have invested in at least one startup that's working on orphan drugs. Over a fifth of these deals also went to a company that's developing either a cancer drug or a cancer therapy, which highlights how oncology has really been a hot space for big pharma.


The explosion of Fin Tech is also drawn in a lot of major banks and we see these banks funding everything from payments and asset management to pure, pure lending. These are all areas where we're seeing startups putting a lot of factor on traditional banks. So it's no surprise that they're taking an active stake in these fields.


And looking at the social graph for big oil and gas, you can see how active this space really is. And it's really a testament to how CVC investments are starting to come from these relatively non-traditional fields. We've got multinationals like Chevron, Shell, and Castrol. We've also got state-owned enterprises like Saudi Aramco. And they're investing in everything from clean tech to wearables and big data.


We've also mapped out deal activity of the big auto manufacturers. So this is another one of those traditional heavy industries that's been around for over a century. But they're also trying to get ahead of a lot of trends in connectivity, autonomous driving obviously, as well as energy. GM, in particular, has made three big moves in the past three months. They bought upside cars assets. They invested half a billion into Lyft. And I'm sure many of you saw that just last week they acquired Cruise Automation for what was said to be over a billion dollars. So this is another space that's definitely starting to heat up.


Lastly, we're seeing that activity in the CPG space is starting to pick up as well. Unilever Ventures is the longer tenure player here. They've made more than a dozen investments in personal care and digital tech since 2011 but Coca-Cola has also established its founder's arm which is an accelerator type program that's looking at everything from on-demand staffing to data analytics. This is definitely still a developing space, as we mentioned in our intro. There are a number of CPGs that are starting initiatives for private investments, Burt's Bees, Campbell Soup, General Mills. So this is a good area to watch as those different investment strategies are playing out.


BENCHMARKING CVCS

Comparing corporate VCs by focus area


Now that we've taken a look into the hot sectors, let's quickly benchmark CVCs and unicorns in exits as well as by different verticals. So this table ranks CVCs by the number of unicorns that they have in their portfolio. We have Salesforce coming out on top here. They've invested in a dozen unicorns like DocuSign, DropBox, and MailSoft. And we also have both of the alphabet investment units on here.


Going down the list, Comcast and Qualcomm also have at least half a dozen unicorns each. So these are definitely all CVCs that have been successfully targeting those high valuation companies. In terms of tech portfolio exits, we have Intel Capital leaving here for 2015. And some other big exits that we've seen were Fox's IPO to start the year, the big Virtustream acquisition by EMC. And Intel had more than double exits of GV which comes in second place here. We also have some other big names elsewhere in the list like Qualcomm, Salesforce, and CISCO rounding out the list.


Over these next few slides, we'll be comparing some select CVCs across different verticals, just to give you some numbers around how many deals they do per year, median deal size, and their stage that they're most frequently investing at. I'm not going to spend a lot of time on the details here. Again, we'll be distributing this deck so you'll have it after for reference so you can poke through all the data. So here just looking at some of the key CVCs in tech, we have your Intels and CISCOs who are doing more of those mid-stage investments. Well, Google Ventures obviously stands out as doing a lot of those seed investments.


And quickly going through some media CVCs as well, Comcast is definitely the most active here, most frequently doing those e-rounds, whereas EDMI, for example, is doing a few more seed deals. In the telecom sector, we have T Venture and Verizon Venture generally leading in terms of activity. And they're most often doing a series A investments. And finally some quick bold points on some financial CVCs. Citi Venture stands out here in terms of being most active, and they're doing a bit larger deals than some of the others on this list.


CASE STUDY: CITI VENTURES


So that leads us into our last section which is our deep dive on Citi Ventures. As we just saw they're one of the most active CVCs in the financial space. And in fact, they're one of the only dedicated venture arms among the bullish rank of banks. So it may not match your Intel Capitals or Google Ventures in terms of investments pace, but it's still a great example of how a 200-year-old institution is tackling some of the challenges that it's facing. Also as a footnote, all the graphics you'll be seeing, in this case, are directly from our CB Insights investor analytics tool. So these are screenshots directly from our built-in engine. To give you some background on Citi Venture strategy, here's a quote from its managing director and a bit of its mission statement that we clipped from its website. The theme here is really that they're trying to break some of the common misconceptions about corporate VC.

 

 They're shying away from exclusivity agreements, they're not exclusively going after acquisitions. Now obviously they're still investing strategically and targeting innovation but they're definitely trying to take a bit of flexibility in their approach. So in terms of its overall investment activity, Citi Ventures made its first investment in 2011 and has usually been in under ten deals a year. But it's picked up the pace with deal making going into 2015 where we saw it hit double digit deals for the first time, and that spike here you're seeing in mid-2012 is just a $200 million square which also IPO'd late last year. 


These heat map charts show the spread of Citi Venture's internet investments across different subsectors. So you can see right away on the left that at first Citi Ventures is focusing on startups that were kind of close to home to its core financial businesses. That dark blue chunk that you see is Fin Tech and asset management companies like Square and InvestLab. But in the past two years, you can see it's more flexible investment philosophy at play a little bit. It's branched out into different focus areas and we've got security companies like Pindrop and Illusive Networks, big data like Datameer and Platfora, and even marketing companies like Optimizely and Persado. 


Now these next two charts are also heat maps but here we're looking at Citi's deal spread across US. It's not too shocking, about two-thirds of their deals have gone to startups in California. That being said, over the past two years, it has added a few New York startups to its portfolio. They did a C round into Betterment, which is a big robo advisor, and they also funded other startups like Trading Ticket and Platfora.


So our next table breaks down Citi Venture's deals across different investment stages. And as you can see, the majority of its deals are between a B and a C round, and as you saw earlier, the median deal size is $21 million which also falls between the B and C medians here. But Citi Ventures isn't totally focused there. In 2015, they completed a C investment to Trading Ticket and also a couple of Series E rounds to startups like Datameer and Chef. So it's interesting to see that they're also participating across investment stages and the full startup lifecycle.


So now just breaking down their investment syndicate, we can see that they're often investing alongside well-known VCs like Andreessen, Battery Ventures, and Bain Capital Ventures. Bain and A16Z are also some of the main feeders who are investing in companies before Citi Ventures commits their own capital in them.


So wrapping up with our case, we just mapped out a timeline that gives you some qualitative context behind all of the data that we just walked through. So this really hammers home how Citi Venture started earlier on focusing on finance, payments companies on their square investment, and then they branched out a bit to security with Pindrop, big data with Platfora and they even partnered with plug-and-play to start building Fin Tech accelerators worldwide. So in just a few years since they've been founded, they've already made headlines with some big investors in other initiatives.


Great, so that covers all the material we have for you today. Let's wrap up now with some housekeeping on questions and getting underlying data. So as we mentioned earlier, we've included the full tables of the most active CVCs so you have these on hand for your reference. As for questions on the webinar and getting to the underlying data, if you're not a customer, you can reach out to our CEO Anand, and you can see his email there and also a link to setup a trial account. If you are a customer, you can get in touch with our customer success manager, John McKenna. You can see his contact info there as well.


QUESTION & ANSWER


Will we see that drop off in Q4 CVC funding trend continuing into 2016?


Okay, so this is a good one because it's definitely something that a lot of investors are watching. So we're not quite at the end of the first quarter yet but we've seen dollars bounce back somewhat. CVCs have already been in over six billion dollars of funding this year and that's up from only $5.2 billion or so in Q4. And we had some mega deals coming back like the $800 million ongoing to Magic Leap. And those are pushing the number up. But on the other hand, at the current run rate, we see CVCs are a little behind last year in terms of deal count. So right now the signals are a bit mixed. But so far at least, we haven't seen activity pulling back further than we saw on the fourth quarter.

 

What are some other categories that CVCs are looking into now?


So machine learning and AI is a topic that has generally been very top of mind. Now obviously that's something that's true for VC in general as well, but we've seen a number of corporate ventures really getting agressive in this space. We've got Bloomberg Beta is probably one of the top here. Recently they've done early stage runs into Diffbot and Deep Genomics. And that's just a few of their AI investments I believe. We also had Samsung Ventures getting into Vicarious Systems, which has taken almost $7 million in funding. And we've had a few acquisitions here as well. Of course, Google's DeepMind has been helping to make a lot of headlines lately in building momentum there as well.

 

What others geographies are getting attention from corporate ventures?


Right now we're seeing Israel coming out of the gates strong this year. If their deal pace keeps up, I believe they're on track to take about 50% more CVC deals than they did last year. We've seen Johnson & Johnson Innovation investing in MedTech, AT&T Ventures getting into data analytics and cyber security. So it's really been a pretty diverse group of deals already. I believe India is another one. We saw earlier in our webinar that they were down in 2015 but now we're seeing a rebound in a couple of more deals to start this year off.

 

How has the breakdown between corporates and CVCs evolved in how they're investing differently?


So as we saw in our data, at first, a lot more private investment was going through CVCs, but with the rise of unicorns and mega deals and the Chinese corporates coming in, we've had a lot of these corporations themselves coming in and doing investments off the balance sheet. In recent quarters, there have been nearly the same amount of funding as CVCs. I believe in Q3 we had CVCs at around $10.5 billion and corporates were just over $10 billion. So one key difference here is that corporate investments are really skewing towards larger rounds, late-stage rounds, and direct corporate minority stakes. And this compares to CVCs that are more diverse in really investing across the startup lifecycle.