Corporate VC Makes a Comeback

By Karen Axelton

Capital for small businesses has been hard to come by for the past few years, and venture capital has been especially so. But now a particular kind of VC—venture capital from corporations—may be making a comeback.

Writing in VentureBeat, venture capitalist Robert R. Ackerman, Jr., contends, “Corporations are seeing the light and reinvesting in venture capital” after a few dry years.

Ackerman cites some impressive figures. In 2010 corporations invested $1.9 billion in venture capital in the United States. That represents an increase of 33 percent from 2009 figures, and accounted for almost 9 percent of all VC investing in 2010, which Ackerman says is close to a record. In fact, he notes, last year corporate venture capitalists invested in 20 percent of all venture capital deals.

General Motors, Google, BMW and Verizon Communications are just some of the corporations getting involved in venture capital today.

Why are corporations suddenly getting back into VC? The answer has to do with small business. Corporations are recognizing small businesses as key drivers of innovation, and realize that small businesses are more efficient at using VC investments than are bigger ones.

The last big surge in corporate VC was during the dotcom boom of 1999-2000, Ackerman says. But this time around there are some important differences. Corporations are being more cautious with their investments, and small businesses are being more careful with the money.  Both are good news for avoiding a repeat of the dotcom bubble and its subsequent bursting.

Ackerman notes that the fit between corporations and the small business recipients of their capital investments isn’t always perfect. Corporations are slow-moving, anxious for fast results, and suffer from rapid turnover at the top, all of which can frustrate a small company’s management team.

But for small businesses seeking an answer to their capital problems, the influx of more options for finding investors can only be a good thing in the long run.

Image by Flickr user Futurilla (Creative Commons)

This entry was posted on Tuesday, May 31st, 2011 at 6:00 am and is filed under Capital Access, small business, Venture Capital. You can follow any responses to this entry through the RSS 2.0 feed.


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