With the football World Cup under way, it seems appropriate to take stock of just how international and cosmopolitan the corporate venturing industry has become and how it continues to grow within the overall innovation capital ecosystem.
As the first half of 2018 ended, subject to some amendment as deals emerge that closed in the period, GCV Analytics found deal values involving corporations were up 20% from the previous highest period, the second half of last year. Corporate venturers have been involved in more than $150bn of deals in the past 12 months even as deal volumes have remained broadly flat.
Last month Ant Financial, an electronic payments service company affiliated with Alibaba, raised $14bn in what was technically a series C round. It was the largest venture funding round in history, according to data provider Crunchbase. The Ant deal alone helped drive June’s deal values to $26.75bn – up almost four times over the $6.94bn in June 2017 – with deal volumes of corporate-backed rounds at 256, considerably up from the 222 funding rounds from the same month last year.
And whereas China over the past few years has been the largest market by value for corporate venturing deals, it has continued to add to its dominance. For the first time, China was the unrivalled leader in receipt of corporate venture capital in the first half of the year, hauling in more than the rest of the world combined.
And in a reflection of CVC importance to the overall venture capital ecosystem, this has translated into China becoming the largest market by deal values. Crunchbase in its provisional second-quarter figures found Chinese startups raised 47% of all money invested, which eclipsed US and Canadian companies’ 35% share – the first time the US and Canada have lost leadership.
As Crunchbase noted: “Chinese corporations like Tencent and Alibaba are committing hundreds of millions of dollars to venture investments, state-sponsored venture firms are investing in China and abroad, and horizontal mergers are forming formidable players in the on-demand services and transportation sectors. With no immediate signs of slowing, the Chinese tech and venture capital ecosystem is positioned to maintain its current momentum and loom ever larger in the global investment landscape.”
Naturally, such a dramatic swing in innovation capital from US as leader since the 1940s until this decade has caught people’s attention and will be a point of discussion at our GCV Asia Congress in Hong Kong on September 20 after our August break from publication.
Harvard Business School is “launching a project looking at the controversial topic of investments in Silicon Valley by foreign corporations and corporate venture groups during the past four decades and their impact on knowledge flows”, while other leading academics at Stanford University are also using GCV Analytics to help their research into performance, following the unique Harvard, Chicago and Stanford business schools collaboration with GCV on the industry in our annual survey published last year.
But while the data shows the rapid shift from a unipolar to bipolar world in innovation capital, the bigger picture is more nuanced as the innovation and knowledge transfers cross almost all borders and reach into all sectors. The opportunities created through crosspollination of ideas and capital have been transformative in making the world richer and healthier. While there are concerns about how open to be – India is in the crosshairs of a debate on whether to protect domestic startups from US and Chinese investors – there is plenty to be done to encourage domestic CVC and innovation capacity before or beyond protectionist barriers.
And the returns for those that time the market and set up well-run professional CVC units can be large if they can translate it into greater investment firepower.
Telstra Ventures, the corporate venturing arm of Australia-based telecoms company Telstra, channelled its activities into a partnership with private equity firm HarbourVest at the start of this month. Founded in 2011, Telstra Ventures runs offices in Australia, the US and China and targets deals in sectors such as mobile internet, media, cloud computing, machine learning and cybersecurity.
Telstra Ventures’ exits include Snapchat owner Snap, digital signature technology provider DocuSign and file-sharing platform Box, which raised a combined total of more than $4.2bn in their initial public offerings, and online video platform Ooyala, which Telstra bought for $270m. The winners from Telstra Ventures’ leveraging resources through HarbourVest are, ultimately, the entrepreneurial businesses and parent companies that benefit from the money and insights shared.
And just as the accolades in the World Cup largely and deservedly go to the winners, the real value is created from bringing all together and letting the skills shine, which seems an appropriate metaphor for the innovation capital world.
