The cumulative value of corporate venture capital deals is growing more quickly than the number of deals publicised, according to data presented by GCV analytics reporter Kaloyan Andonov and Mason Maini, senior director for business development at deals database Pitchbook, on the second day of the Global Corporate Venturing Symposium.
Andonov said there had been a 2.6x increase in the number of deals recorded by GCV since 2011, in comparison to a 6.7x rise in cumulative dollar value over the same period. GCV Analytics recorded 2,362 deals in 2017 adding up to approximately $112bn, up from $93.3bn generated from 2,222 deals the previous year.
Pitchbook’s findings for wider venture capital and private equity sectors portrayed similar trends, with CVCs increasingly opting for large deals which result in high valuations. Maini said the European VC deal count for 2018 so far amounted to 571, a fall of almost 50% year-on-year.
“As you can see for the graph for the last three years, the deal count is actually sliding but there is more in terms of capital being invested,” Maini said. “2018 is actually on track to be the same level of capital invested as in 2017. In terms of microfunds, we are seeing fewer raised, which also goes to show the lack of smaller deals happening.”
Maini said European VC exit activity had been slow so far in 2018, which he argued reflected a trend toward more dispersed exit strategies, rather than the traditional VC holding window of four or five years.
The number of CVC exits has remained fairly stable, according to GCV Analytics. Approximately 70% of CVC exits have tended to be through acquisitions, with 20% resulting from initial public offerings and the remainder down to other outcomes such as buyouts.
Andonov said: “The more interesting part about exits is: what sort of sector do the companies being exited come from? They come from IT, healthcare, media and consumer, with consumer being mostly e-commerce businesses. In terms of geographical distribution, we say about six out of 10 are actually based in the US.
“How do we explain this disparity geographically? Well on the one hand in Europe there is a notorious funding gap that the EU is trying to fill in right now and, on the other, the innovation scene in Asia and, in particular, China is a bit too young.”
Andonov added that the US, followed by Europe, was also absorbing the majority of CVC investment, though there has been a rise in the capital poured into Asia-Pacific over recent years. More corporate investors are now operating across several markets.
“About half of the CVCs seem to contribute capital in more than one geography,” Andonov said. “It might seem like the trend is for corporates to become less international, but this should be taken with a pinch of salt because there are new CVC units being formed constantly.
“And these units normally focus on one geography, whether it is their domestic market or their interest in particular technologies developing in Silicon Valley.”
GCV Analytics has recorded an upward trend in corporate deal sizes from the series A stage onwards, with a large proportion of CVC funding in 2017 headed to sectors such as data analytics, transport, pharmaceuticals, medical devices and artificial intelligence.
Maini added that software had remained a focal point, with VC investors generally choosing to channel more cash into stable industries, though patient capital is also staging something of a comeback.
“If you look at sectors such as pharma and biotech you actually see a tail off going up to 2014 in terms of investing,” he said. “But we are actually seeing that trend reversing, so more deals are happening in the biotech and pharma space.”