Corporations may be hitting tipping point in terms of gaining institutional acceptance from mainstream financial venture capital firms (VCs).
There was talk at our Global Corporate Venturing Symposium in London last month that highly regarded VC Sequoia Capital was looking to tighten its relationships with corporations. This move is a volte face, given that traditionally corporate venturing units have struggled to secure acceptance from top-tier independent venture firms.
The shift is partly due to the rising clout of corporations in dealmaking, with US-based bank Silicon Valley Bank estimating a third of venture deals involve corporates. It is also because there is a growing recognition of the value that corporate venturing and corporate partnership can bring to growth companies.
There is an argument that VCs failing to embrace relationships with corporate venturers could lose out to peers actively seeking such connections. At our symposium, VC Andreessen Horowitz’s Jamie McGurk talked about what the firm was doing to build links with corporates, and we will have more detail on his comments next month in a fireside chat with Sue Siegel, head of GE Ventures, the corporate venturing unit of US-based General Electric.
It will be interesting to see whether the growing overtures from independent VCs put a stop to the frequent complaint that VCs often view corporates as a source of “dumb money”, offering them deals at a high price. Such lack of long-term partnership arguably sets back the wider innovation ecosystem, even if it squeezes out higher returns on individual deals.
This magazine contains much discussion from the symposium, both in our special feature on the event and in our monthly sector focus, where our deep dive into the healthcare sector showcases two of the main speeches at the conference, from Jens Eckstein, head of UK-based pharmaceutical group GlaxoSmithKline’s SR One corporate venturing unit, and William Taranto, head of US-based healthcare company Merck’s corporate venturing unit, Merck Global Health Innovation Fund.
In the healthcare sector itself, corporate venturing is changing. Eckstein talks about how research in the bio-sciences needs to move beyond its “moon-shot” approach. Bioscience investing has long been the dominant area in corporate venturing, but the feature also picks up on how the sector’s convergence with IT is likely to be a big theme in that industry. Taranto is now managing a $500m fund specifically to invest in that area, and many think this convergence will only grow.
The expansion of digital into all areas was probably the main talking point at our symposium.
This digital theme was not only represented by the strong presence of core IT players such as Intel Capital, including its head Arvind Sodhani, IBM Venture Capital, including its head Claudia Fan Munce, Qualcomm Ventures, including its head Nagraj Kashyap, and Cisco, including Europe head Frederic Rombaut.
Yet what stood out was how frequently representatives from the other sectors referenced the importance of digital, such as healthcare and oil and gas, with BP Ventures’ head Issam Dairanieh flagging this as a theme, and agricultural technology, for which we held themed discussions on convergence led by agritech specialist VC Bioenterprise Capital, which is reaching out to corporations. Bioenterprise’s CEO Dave Smardon and managing partner Joseph Regan held a panel discussion on the topic of convergence with IBM Venture Capital’s Deborah Magid and Switzerland-based agricultural company Syngenta Ventures’ Alex Steel.
Given that the digital transformation is altering corporate strategy, and, in their quest to keep track of this change, corporations themselves are now treated as key players in the venture capital world, it is perhaps fair to declare that corporate venturing has entered the mainstream.