Corporate venturing unit executives were in an ebullient mood in Silicon Valley at the annual summit of trade body NVCA’s Corporate Venture Group last week, although doubts are beginning to surface that the past few years have perhaps been a little too good for those working in startup land.
There were a decent quantity of representatives of new groups mingling with the regular attendees at the event, hosted this year at accelerator Plug and Play Tech Center, and the mood continues to be one of expansion in the wider corporate venturing community. There are roughly 1200 groups globally, which is a double the number investing compared to five years ago.
Yet there is also increased hand-wringing in Silicon Valley that valuations for high growth technology businesses have been running out of control. Sir Michael Moritz, chairman of Sequoia Capital, added his voice to the concerns, coining the term “sub-prime unicorn”, comparing the heady valuations of the proliferating startup businesses valued at more than $1bn to the loose standards in mortgage lending. which helped trigger the global financial crisis that began in 2007.
Numerous people at the NVCA gathering and beyond referenced the article, saying that fundraisings for hot startups are taking longer, and concerns are being raised that many of the companies which have been funded are unlikely to ever match the valuations of their last funding rounds.
Intriguingly the wider venture capital industry is taking more interest in corporations themselves, with a venture capital panel of top tier firms addressing the audience. This high level participation is the latest sign corporate venturing is clearly on the radar of many in the Valley.
It also seems the case that should sentiment turn for highly valued growth companies, many are betting the enthusiasm for corporate venturing will remain strong.
The general verdict of those on the sidelines of the NVCA’s Corporate Venture Group conference was technological innovation’s impact on the market of incumbents is becoming hard to ignore. This means corporates will need to remain active in the venture market despite the growing possibility of losses emerging in portfolios should sentiment turn against high growth companies.