Where did global corporate VC funding go in 2016?

22 Feb 2017

Dubai skyline. Image: Iakov Kalinin/Shutterstock

Despite a promising start, the number of CVC deals slumped towards the end of 2016, falling below 300 deals for the first time in nearly two years.

Corporate venture capital (CVC) is a popular funding channel for start-ups and SMEs in the tech industry, but new indications from CB Insights suggest that 2017 might be off to a sluggish start.

In a report released today (22 February), the market analyst firm has calculate that a total of $24.9bn was invested in companies across 1,352 deals in 2016.

However, despite a very promising start for the number of deals made in Q1 of last year – a record 386 – the final quarter of 2016 fell just below the 300 deal mark for the first time in almost two years.

This followed a period in Q3 where quarterly deal activity increased by as much as 18pc, but fell by 21pc in the next.

By comparison, at the same time in 2015, there were 329 deals. This figure jumped to 357 in Q1 of 2016.

Another noticeable trend in recent years is the growing influence of Europe as the force to be reckoned with when it comes to CVC deals.

Making up just 17pc of deals in the final quarter of 2015, Europe accounted for 27pc of the world’s total CVC deals in Q4 2016, while the US declined by 6pc and Asia by 5pc.

CVC graphic

Global CVC deals over the past five years. Image: CB Insights

Little interest in computer hardware

Not much has changed when it comes to the stage of funding these corporations are investing in. Despite an increase in Series A investment by more than 5pc in Q1 2016, the rest remained largely the same.

By the end of 2016, Series A (30pc) remains the most funded, followed by Series B and seed funding, which both made up 22pc of deals each.

In terms of the sci-tech industry, internet applications remains the overwhelming target of these funds, comprising almost half (45pc) of all deals.

By the end of 2016, mobile and telecoms was the next largest sector at 18pc, with just 2pc of deals going to computer hardware and services.

CVC graphics 1

Sectors funded by CVC deals. Image: CB Insights

Record number of new CVCs

Overall however, CVC funding still accounts for only a fraction of what is generated by standard VC funding, making up just 20pc of the 3,427 VC deals that occurred in the second half of 2016.

There was some positive news for last year, however, compared with the previous five. For the first time, new CVC funds surpassed the 100 mark (107) in 2016, including JetBlue Technology Ventures and the Sony Innovation Fund.

That said, they still have some way to go before they can reach the same power as Intel Capital and Google Ventures, with these organisations participating in 50 investments each.

Colm Gorey was a senior journalist with Silicon Republic