It has been a banner year for corporate venturing round the world. In the January issue’s editorial, Global Corporate Venturing expected an "interesting" year and so it has been as groups have played their part in being value-added investors complementing the entrepreneurial ecosystem.
The start of the year promised further economic growth – a precursor to increased venture investing – a recovery in spirits and rising stock markets, but many issues had still to be dealt with coming out of the credit crunch, primarily sovereign, corporate and individual debt levels.
Global Corporate Venturing warned there was a period of grace to use free cashflows to innovate and reorganise before the "owners of the debt will call to collect both the interest and the principal borrowed".
This day of reckoning has at times drawn extremely near, judging by the worries in the eurozone about the single currency being torn apart or US politicians remaining partisan and unable to agree on how to budget for American promises, as well as exogenous shocks, such as Japan’s terrible tsunami (see survey for the industry’s perspective on the most important events and trends of the year).
But the world’s economy has continued to grow at about 4% – albeit more slowly in developed markets than in nascent regions – and is expected to tick along at similar rates as we approach the top of the next economic cycle later this decade, barring unexpected events. And, crucially, there has been widespread recognition of the need to innovate and reorganise in many areas.
Corporate venturing is just one tool in the open innovation kit-bag but this year has been recognised as one of the most valuable and versatile given the size and range of groups setting up, expanding or reinvigorating programmes.
With an estimated $8 trillion in cash sitting on corporate balance sheets in the US and Europe alone, there is plenty of opportunity for the industry to continue growing in size, but the money will also be used to fund other areas of business development, particularly mergers and acquisitions.
This year there has been a number of deals either pushing corporate venturing units together or dividing them, and the results have been promising, with senior executives remaining wedded to the value the units can bring to evolving parent organisations.
These new, merged and established corporate venturing units have done more deals in more regions across more sectors and stages of development than ever before (see the annual review section that includes people moves, fundraising and deal activity).
There is almost no element in society and business that is now missed by corporate venturing, while other areas of finance remain crippled by shortsighted regulations and financial intermediaries focused on their immediate pay packet at the expense of allocating capital efficiently to the most productive areas of the economy to increase value over the longer term.
Corporate venturing, by contrast, has held aloft the banner of what people are capable of achieving when interests are aligned using the tool of capitalism, and the promise and innovative ideas are backed to make the world a better place.
There are few finer ways to earn a living and live a life but it remains a challenging and difficult profession in which to find deals, reconcile an entrepreneur’s vision with a parent’s strategic needs, syndicate partners with their own vested interests and build value toward an eventual successful exit.
Helpfully, this year there has been an influx of talented managers sharing the collective wisdom and lessons of incumbents working in an industry reaching maturity and, as this column has described before, its golden age. The task of this generation of managers, therefore, is to reflect this opportunity and promise and leave the industry, its portfolio companies and parent businesses in better shape than ever before.