Watch our innovation editor Maija Palmer discuss why this data caught our eye, and the questions it raises.
CVC-backed investments now represent more than a fifth of all global venture capital investment value — up from 11% a decade ago, according to consultants Bain & Company's 2022 Global M&A report.
It is well known that venture capital investment globally has been growing fast — from $54bn in 2010 to $503bn at the third quarter of 2021, according to Bain (and up to $643bn at the end of 2021 according to Crunchbase).
But CVC's share of that has been growing even faster. Between 2010 and 3Q 2021, total VC investment value grew at a compound annual growth rate of 22%, compared to 31% CAGR for CVC-backed deal value.
Not bad for what is often considered VC's poorer cousin — and in line with the strides Sifted has seen in investment and portfolio management sophistication and maturity on the part of corporate innovation efforts over the last decade.
A comment from the team at Bain, however, gave us pause for thought.
The authors noted that while CVC is an ideal tool for market-sensing and opening the door for future M&A, "most companies focus on late-stage investments, treating CVC more like traditional M&A. They look for companies that they can bring into the core business right now and feel more comfortable performing diligence on those with an existing product or market fit. While beneficial, this approach misses a critical part of the value that comes from exposure to early-stage companies.”
👉 Read: How to build a CVC fund
This generalisation is nothing new — CVC units have been pegged as more risk-averse than their traditional venture capital counterparts for a long time.
But we’re curious about whether the tide is turning. Many CVC investors do now look at earlier-stage investments, especially in deeptech startups where they can be in a strong position to do due diligence on the underlying technology.
We'd love to kow your thoughts on this.
- Are CVCs in your experience investing earlier?
- And are we therefore likely to see this share of the pie grow even further?
