Big companies are doing less investing in startups
Corporate venture capital firms have closed fewer deals and raised less money over the last few months, with activity level at a 9-quarter low, according to a new report from research firm CB Insights.
The overall deal flow for corporate VC firms (i.e. divisions like Google Ventures, Intel Capital and Qualcomm Ventures) is down 11 percent from the first to the second quarter this year.
Venture capital funding from those deals fell to $4.7 billion, down from $8 billion over the quarter, a 41 percent decrease, and $7.4 billion over the year.
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Google Ventures has emerged as the most active player of corporate venture capital firms over the last six months, surpassing Intel Capital. The venture capital arm of Alphabet has invested in more than 30 companies, including ARMO BioSciences, Managed by Q and Ionic Security, in 2016.
Corporate investing has been scrutinized by independent venture capitalists like Union Square Ventures' Fred Wilson, who once referred to them as "the devil." Wilson suggested that these corporations should be focused on acquisitions, not early-stage investing.
There are cases of these investment arms ending up making an acquisition. For example, Salesforce Ventures was an investor in word processing app Quip prior to its acquisition by Salesforce earlier this month.
Several other recent high-profile deals have taken place. For instance, Magic Leap, a Florida-based augmented reality startup, raised $793.5 million in a Series C round in February with support from Qualcomm Ventures. The popular chat app Slack closed a $200 million Series F in April, with participation from Comcast Ventures.
However, deals for internet-based companies like Slack have also reached a new low over the last five quarters. Corporate venture capital firms financed $1.8 billion in the internet sector, down from about $3.9 billion both last quarter and in the second quarter of 2015, according to CB Insights.
While the number of deals with corporate venture capital firms has declined, more investment firms are cropping up to support early-stage companies. So far in 2016, 53 new firms made their investments, and that put its on track to surpass the 85 firms started last year.
Topics Google
Kerry Flynn is a business reporter for Mashable covering the tech industry. She previously reported on social media companies, mobile apps and startups for International Business Times. She has also written for The Huffington Post, Forbes and Money magazine. Kerry studied environmental science and economics at Harvard College, where she led The Harvard Crimson's metro news and design teams and played mellophone in the Band. When not listening to startup pitches, she runs half-marathons, plays with puppies and pretends to like craft beer.
