Corporate Investing is the when larger corporations seek investment in smaller external start-up companies. The reason for these investments is often a combination of financial gains and strategic management. Firstly, like regular venture capital, the financial return on investment in these companies would be beneficial for large corporations. Secondly, in a strategic sense, corporate investing would also allow big companies to retain partial control over potential changes in their target market and industry. It is a great way for a developing company to create a relationship with an established company, especially if their good or service will directly impact the mutual industry or corporation. These types of strategic investments can range from a couple hundred thousand dollars to a few million. According to data from the National Venture Capital Association, the largest portion of corporate investing goes towards companies in their Expansion or Later Stage cycles of business, rounding out to about 87% in 2006.
Investment into start-up companies is referred to as Corporate Venture Capital (CVC). Although not all companies have established CVC departments or entities, many of these corporations are willing to invest and fund smaller businesses should the opportunity present itself. As long as you can clearly illustrate how your company will benefit their industry, or give them a competitive advantage over other competitors, larger corporations will become very receptive towards investments.
Industries of CVC
Currently, the top industries of CVC are Biotechnology, Software, Telecommunications, and Media/Entertainment. Some of the big names in Corporate Investors are computer firms such as Microsoft, Acer, and Intel who capitalize in new companies in order to apply emerging technology towards their own efforts. Most notable is perhaps Intel’s CVC entity Intel Capital who, since 1991, has invested over 10 billion dollars in over 1,100 companies.