Don’t go to corporate VC now. Get money at a much higher valuation from them later.” This is a common mantra many traditional VCs tell founders when attempting to dissuade them from taking corporate VC money during early-stage rounds. Some traditional VCs also bring additional arguments against corporate investment by portraying an associated conflict, unfair legal terms in deals, and inability, or lack of desire, to follow up in future investment rounds.
Certainly, such concerns have occurred in the past with some corporate venturers, just as many of these concerns have occurred with some traditional VCs as well. But these types of discussions often imply that I am not a high-quality, early-stage investor.
However, this mindset is changing quickly now.
Entrepreneurs are learning that not all corporate investors are alike, and that there are a group of value-add ecosystem investors, such as Qualcomm Ventures, where these rules do not apply.
Moreover, many factors in the corporate investment landscape have changed and subsequently placed corporate VC groups in a terrific position to provide entrepreneurs with early-stage capital and specific value-add in which a corporation is uniquely skilled.
First, as we have experienced at Qualcomm, many bold-idea startups need significant technical expertise from high-technology corporations to achieve breakthrough milestones.
We have put together a series of examples, from pioneers in their field, that, in their dealings with us, we believe demonstrate their enthusiasm for dealing with corporate venturers taking the right strategy at early stage.
The rapid convergence of new-age technologies – mobile processing, sensors and cloud computing – continues to unleash transformative change across all business and consumer industries. “We have a very bold vision at Magic Leap, and early on we looked to great corporate sources such as Qualcomm Ventures to help achieve our goals,” says Rony Abovitz, CEO and founder of Magic Leap.
Second, recent evidence of corporate venture capital success has given entrepreneurs confidence in securing early-stage financing. For example, at Qualcomm Ventures, we have been fortunate to achieve tremendous outcomes through investing in companies such as Xiaomi, Fitbit, Waze – acquired by Google for over $1bn – and Invensense during early stages.
Finally, word of mouth is spreading across the entrepreneurial community that there are a growing number of high-quality corporate venturers. “Qualcomm Ventures has been fantastic to work with. They are a first-rate VC firm that grew with us from the beginning across multiple financing rounds,” says Andrew Toy, CEO and co-founder of Divide.com, acquired by Google in 2014.
These factors have enabled corporate venturing teams to restructure internal groups to capitalise better on early-stage financing opportunities. At Qualcomm Ventures, we have formed a team that has seeded 60 startups since 2011. “Our early-stage fund provides us the opportunity to back big impactful ideas that can drive the future of mobile – right at a startup’s inception,” says Patrick Eggen, senior director and head of Qualcomm
Ventures’ early-stage fund. Eric Yuan, CEO and founder of Zoom.us, adds: “I was very excited to have Qualcomm Ventures invest into Zoom during our seed financing stage because I felt they could bring Zoom unique value, and they have absolutely done that.”
So what will the future hold with early-stage corporate venturers? It is hard to predict exactly. But with emerging well-funded investment arms backed by cutting-edge corporations, early-stage corporate venturing is definitely here to stay.
“We were thrilled to co-invest with Qualcomm Ventures in Magic Leap and other deals, and we look forward to doing more early-stage investments together,” notes Jamie McGurk, partner at Andreessen Horowitz.
We look forward to this growing early-stage corporate venturing future too.