#6: CVC Trends and Predictions for the Future
Hi, I'm Jeppe and welcome to my weekly newsletter on Corporate Venturing, released every Tuesday. My aim is to provide a comprehensive perspective on the latest developments in the field and its related topics, drawing from the insights of top management, venture capitalists, founders, LPs, and family offices. I aim to offer valuable information and thought-provoking content that will aid in understanding the importance of Corporate Venturing in business strategy.
For today's topic I'm looking into trends and predictions for the future of CVC. It's clear that we come out of years of a heavy cash inflow by especially US and Chinese CVC investors and the market has seen significant growth and evolution. But it has slowed down and the immense growth according to Pitchbook of +450% which is very impressive has come to a halt.
This is not unexpected as it follows the VC trend that is also significantly down in activity.
I've seen different statements from CVCs in the past week. An example is Maersk Growth stating that their liquidity needs to last even longer, which clearly displays that they are following standard VC behavior in the current market, making sure that their portfolio companies burn less cash.
My biggest concern in the current market is all the balance sheet investors that we have in the CVC market. One of the biggest risks to a CVC is the underlying financial health of it's parent company and it's strategy. My prediction is that we will see CVCs close down over the next couple of years as companies will cut costs as well as adapting their strategy to the new unsure times.
Future trends
One of the most significant trends we're seeing in CVC is the increased focus on impact investing. As more and more companies prioritize sustainability and social responsibility, we're seeing a rise in CVC investments in startups that are working to address some of the world's most pressing challenges. These investments not only have the potential to generate financial returns, but also create positive social and environmental impact. CVCs are more risk willing as described in one of my previous newsletters, which materialises in their willingness to allocate financial risk investing into deep-tech companies. In this category of venture investing, we clearly see the benefit of CVC investors as standard VCs normally exclude this type of investment as it comes with additional risk due to the heavy investment needed in hardware development.
Another trend that's emerging in the world of CVC is the rise of industry-specific investment programs. Rather than investing across a broad range of sectors, many corporations are creating targeted programs that focus on a specific industry or technology. This allows corporations to leverage their expertise and network in a particular field, and can lead to more successful and impactful investments.
We're also seeing an increasing focus on collaboration and partnership between corporations and startups. Rather than simply providing funding, many corporations are seeking to work more closely with startups to co-develop products, share expertise and create joint ventures. This approach can create more mutually beneficial relationships, and can lead to more successful outcomes for both parties. This is one of the many benefits of taking money from CVCs, and corportions should focus on their value add to startups. David Nothacker mentioned in Newsletter 3 his collaboration with Next47 and the benefits hereof.
Looking past the current financial environment, I predict that CVC will continue to grow in popularity and importance. With more and more corporations recognising the value of investing in startups, we're likely to see an increase in the number of CVC funds, as well as the size of individual investments. I also anticipate that the CVC market will become more competitive, with corporations tyying to invest in the most promising startups.
I also expect to see continued innovation in the CVC space. From new investment models to the use of artificial intelligence and machine learning to identify promising startups, I anticipate that the CVC market will continue to evolve and adapt to the changing needs of corporations and startups alike.
In conclusion, the future of CVC looks bright, with significant growth and innovation on the horizon. I am excited to see how this market evolves in the years to come, and I look forward to sharing more insights and predictions with you in future newsletters.
I hope you enjoyed this week's newsletter. Next week, I will delve into "Corporate-startup collaboration opportunities through CVC"
If you have any ideas you'd like to contribute to the newsletter, please don't hesitate to reach out and share them with me.
/Jeppe