PRINT THIS PAGE Corporate venture activity on the rise in 2006
03/01/2007. Source:PricewaterhouseCoopers, NVCA.
In the second quarter of 2006, corporate venture capital investment reached its highest level since the first quarter of 2002, according to the MoneyTree Report by PricewaterhouseCoopers and the NVCA, based on Thomson Financial data. Corporate venture capital is defined as operating corporations investing directly in portfolio companies, either on a sole basis or alongside traditional, independent venture capital funds.
During the second quarter, corporate venture capital groups participated in 195 deals or 22.2% of all venture capital deals completed. These deals represented $602.5 million or 9.2% of all dollars that venture capitalists invested in the quarter. This activity has been steadily increasing during the last 18 months.
"The uptick in corporate venture capital activity suggests that large companies are currently in a position to look to the future and take some risks as it relates to new technologies," said Mark Heesen, president of the National Venture Capital Association. "The overall commitment to venture capital investment by corporations has ebbed and flowed over time. It is always a tug-of-war between short term earnings pressures and long term product vision. For many companies, it is often difficult to stay the course of investment, which could last 7 to 15 years. But the VC industry welcomes the corporate players for their sector expertise and access to markets."
"Corporate venture capital groups have a great deal to offer entrepreneurs and traditional venture capital partners at this point in time," said Gerald Brady of Siemens Corporation and Chairman of the NVCA Corporate Venture Capital Group. "We fill a need in areas such as healthcare where maintaining a development pipeline is costly but critical to long term growth; in enterprise software where traditional VCs are investing less these days; and in clean tech where we have a long standing expertise and commitment to the space. Add to that the global reach that comes with a corporate venture partnership and the opportunities are significant."
The sectors receiving the highest percentage of corporate dollars in the first half of 2006 were telecommunications, biotechnology and software at 15.3, 15.2 and 14.6 %, respectively. The highest percentages of corporate deals were completed in software, biotechnology and medical devices at 23.0, 13.9, and 10.7%, respectively.
"Corporate venture investment at its highest since 2002 demonstrates the corporate world's reviving confidence in the economy and the market overall," said Claudia Fan Munce, managing director, IBM Venture Capital Group. "The rise in corporate investment clearly represents the development of a collaborative ecosystem to help accelerate the pace of innovation, driven by ever-advancing customer needs. In response to these shifts in the marketplace, corporations today are exploring new areas of opportunity by building stronger ties with the venture community, for future growth."
"The resurgence in corporate involvement in venture capital investing parallels the increase in overall corporate profitability. S&P 500 companies have enjoyed a sustained period of earnings growth, creating a renewed appetite for risk that had been severely curtailed by the technology bubble bursting," said Darrell Pinto, director of Global Private Equity Performance at Thomson Financial. "This is the highest level of corporate venture capital investment, both by the dollars invested and the number of deals being done, since early 2002."
The National Venture Capital Association represents approximately 480 venture capital and private equity firms. Their mission is to foster greater understanding of the importance of venture capital to the U.S. economy, and support entrepreneurial activity and innovation.
The PricewaterhouseCoopers Private Equity & Venture Capital Practice is part of the Global Technology Industry Group.
Thomson Financial is a provider of information and technology solutions to the worldwide financial community.
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