Corporate Venture Capital to 'blame' for startup valuation bubble

Overview:

Corporate Venture Capital (CVC) has been on the rise over the past decade, and for good reason.  CVCs don't invest simply for returns, they invest for long-term strategic factors that greatly influence portfolio architecture and investment thesis.  CVCs are gaining momentum because corporations are slow to innovate and require infusion of new technologies and talent to maintain market share.

A look at the numbers:

In 2016, CVCs invested $32.3B across 1,203 deals, this accounted for 1/3 of all Venture Capital activity that year.

In 2016, the median valuation of a CVC investment was $26M while the median valuation for a VC investment was $16.5M.

Summary: 

CVCs play a very important role in the startup landscape, often by making use of corporate resources when the investment is conducted under a strategic and long-term vision.  This translates to higher valuations, potentially quicker exits and an increased rate of patents because CVCs wll increase a startups innovation value.  Research has shown, in Europe for example, that overall economic performance is 50% higher for CVC-backed startups, compared to 41% for VC-backed startups.

In late-stage investments a CVC investor, as part of a syndicate, will generally double the valuation.

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michael tsokur