Corporate Venture Groups Participated in 20.6 Percent of all Deals and 24.2 Percent of Investment in Biotechnology Sector

Print 16 September 2016
U.S. National Venture Capital Association

WASHINGTON, DC – Corporate venture groups deployed over $1.2 billion in 198 deals to the entrepreneurial ecosystem in the second quarter of 2016, according to the MoneyTree™ Report by PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters.  The percentage of deals with corporate venture participation was 20.6 percent during the second three months of the year.  While this marked the sixth straight quarter of over 20 percent of all venture deals having corporate venture involvement, it was the first quarter to show signs of a slowdown in corporate venture participation.  Including the second quarter, corporate venture groups have now invested more than $1 billion into the entrepreneurial ecosystem for ten straight quarters.

“Corporate venture activity for the quarter largely mirrored overall venture investing trends, marked by a 17 percent drop in the number of deals with corporate venture participation.  While the second quarter was more subdued, we’ve witnessed a high-level of corporate venture engagement the past year and a half, demonstrating an appreciation by corporations of the value and importance of being a part of the entrepreneurial ecosystem,” said Bobby Franklin, President and CEO of NVCA.  “Despite software companies receiving the lion’s share of corporate venture capital, biotechnology companies have benefited significantly from this increased activity, drawing nearly a quarter of their investment from corporate venture groups during the second quarter and more than 20 percent through the first half of the year.”

Sector Analysis

Consistent with overall investment trends, software companies continue to be the beneficiaries of increased corporate venture activity, receiving over $415 million in 93 deals, representing 33.6 percent of corporate venture dollars deployed and about 47 percent of deals.  Within the software sector, one-quarter of all venture deals had corporate venture participation.  Compared to overall venture investment dollars by sector, corporate venture groups were significantly under-weighted in the software sector.

Biotechnology companies received the second largest amount of corporate venture dollars in the second quarter, attracting $407 million in 25 deals, representing 33 percent of corporate venture dollars invested and 12.6 percent of deals.  As a share of overall venture dollars invested in biotechnology companies, corporate venture groups accounted for 24.2 percent of total dollars invested, which was substantially over-weighted in the sector.

Media and entertainment companies received the third largest amount of corporate venture dollars in the second quarter, supplanting computers and peripherals companies, which previously owned the third-place spot in the first quarter of 2016.  Media and entertainment companies drew $102.8 million through 15 deals.  By dollars, this represented 8.3 percent of all corporate venture dollars deployed and 7.6 percent of deals.  Compared to overall investment trend in the sector, corporate venture investment into media and entertainment companies was slightly over-weighted.

Stage of Investment Analysis

In the second quarter of 2016, corporate venture groups were more active in investing in companies at the seed stage than they were during the first quarter of the year, deploying $98.5 million to seed stage companies through 12 deals.  This represented 8 percent of all corporate venture dollars deployed and 6 percent of all deals involving corporate venture investors.  Early stage companies attracted the majority of corporate venture dollars, with $505.7 million invested in 95 deals, totaling 41 percent of all corporate venture dollars deployed and 48 percent of deals with corporate venture participation.

For investment into startups farther along in their growth cycles, corporate venture was under-weighted in expansion stage investment and over-weighted in later stage investment as compared to overall venture dollars invested in those stages.  Corporate venture groups invested $383.1 million across 69 deals into expansion stage companies and $247.9 million across 22 deals into later stage companies.

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