Corporations have used the Covid-19 pandemic and an almost worldwide lockdown in the second quarter of this year to start venture investing.
This is a counter-cyclical move by the world’s largest investors indicating the strategic importance senior management is giving to innovation capacity and reflects the lessons learned from the dot.com bubble and crash 20 years earlier when corporations were late to invest and first to retreat.
There were 368 first-time corporate investors in the first half, almost equally split (187 and 181) between the first and second three-month periods of the year, according to Global Corporate Venturing’s (GCV) proprietary data. The previous highest number of first-time corporate investors buying minority stakes in private companies was in the third quarter of last year with 177.
In the first half (H1) of 2019 there were 154 first-time corporate investors, up from 229 in H1 2018 and less than 100 in 2017, according to GCV Analytics.
Existing corporate venture investors remained active.
Many corporate venturers who participated in our first GCV Digital Forum last month said they had been first looking to recapitalise existing portfolio companies and then exploring new investment opportunities.
GCV Analytics found between March and May about one in every four deals was a follow-on, with the other three being new investments (or at least first rounds with disclosed corporate backing).
Overall, GCV Analytics tracked 762 funding rounds involving corporate venturers in the second quarter (Q2), representing a nearly 11% drop from the 855 rounds recorded in the same period last year.
The estimated total investment dollars in Q2 stood at $25.69bn, down 14% from the $29.92bn recorded during the same period last year.
When comparing Q2 with the previous quarter, there was a decrease of 6% from 810 in Q1.
The first six months in total registered 1,572 deals with an estimated total capital deployed of $50.4bn, down 5% by deal volume and 21% by deal value from the same period in the previous year’s 1,656 rounds and $64.1bn, respectively.
The lockdown measures across the globe and the looming economic downturn benefited some emerging businesses while threatening the existence of others.
GCV Analytics also tracked 61 corporate-related exits during the second quarter, including 32 acquisitions, 22 initial public offerings (IPOs), five mergers, one stake sale and one other transaction. The total estimated amount of exited capital in Q2 2020 was $11.41bn, considerably lower than the $22.39bn in Q2 of the previous year and also lower than the figure from the first quarter of this year ($20.9bn). Only two of the top reported exits stood above the $1bn mark.
Corporate venturers supported a total of 59 fundraising initiatives in the second quarter, down from 81 such initiatives reported during the same period in 2019 and also less than the 77 reported in 2018. However, the estimated total capital raised, $7.34bn, was roughly 11% higher than last year’s Q2 figure of $6.62bn.