This year has seen a ringing endorsement from the leaders of the venture industry of the importance of corporate venturing to the ecosystem.
Venture capital legends, such as Scott Sandell, managing partner at NEA, and Scott Kupor, partner at Andreessen Horowitz, described how they now looked to work and invest with top corporate venturing capital units at the GCVI Summit in January. This, however, was pre-downturn.
At June’s first GCV Digital Forum, senior corporate representatives reiterated their desire to stay the course and continue to support portfolio companies through the Covid-19 economic downturn. They also reiterated their desire to find and lead new deals.
The data support this. Deals are up 15% in dollars year-on-year though they are down in numbers. The number of exits, versus the same month last year, is comparable and there are more funding initiatives than in the past few months.
This period is more than a chance to reassure VCs and entrepreneurs that this time, it really is different. It is also a chance for the whole venture industry to step away from its reputation as a pro-cyclical part of financial services, that is, one that invests more towards the top of the economic cycle than the bottom.
VC should prefer to do more at worse economic times because the numbers of entrepreneurs should increase as traditional job opportunities decline and valuations improve.
Now is the chance to achieve this. But to do so requires all parts to work more closely together.
Already, by copying corporate venture capital, VCs have experienced the benefits of providing more value-added services, such as professional human resources, business development and customer targeting, to entrepreneurs. These services lower loss rates and increase VCs’ chances of raising their next funds.
It also creates bigger businesses. The 50 startups making broadcaster CNBC’s 2020 Disruptor list are “at the epicentre of a world changing in previously unimaginable ways, turning ideas in cybersecurity, education, health IT, logistics and delivery, fintech and agriculture into a new wave of billion-dollar businesses”.
Thirty-six of the 50 disruptors are unicorns that have already reached or passed the $1bn valuation mark – perhaps unsurprising given they have collectively raised more than $74bn in VC. More than 40 of them are corporate-backed, which gave them access to these tremendous sums of capital.
Scale has been achieved alongside greater professionalism that, as a service provider, venture investing is about supporting longer-term innovation and the entrepreneurs. The benefits to limited partners in terms of financial and strategic can then be more easily reaped and valued.
The source of the capital adjusts the mix of requirements to be delivered back to the limited partners and hence the types of entrepreneurs they support and how.
These differences, however, are relatively minor compared with the bigger questions a decade ago about how disparate the top corporate, independent, government, angel and family, or university venturing units were.
Now, the similarities are more apparent and the key differentiator is skill at finding and working with the best entrepreneurs. The top investors increasingly look and sound the same and this is likely to mean the best ones will increasingly want to work together.
This is why, at our GCV Digital Forum 2.0 on September 29, we are setting up the Global Innovation Venturing to bring together the top investors from the GCV Leadership Society with their venture peers.
The best entrepreneurs already benefit from the network effects of investor syndicates. Now investors can find their own gathering place.
