March 16, 2011 source: Silicon Valley MercuryNews.com
During the dot-com craze, just about every company this side of your corner hot-dog stand set up a venture capital arm. With Wall Street and Main Street slavering for tech investments, corporate chiefs launched seed funds to boost their bottom lines and scope possible acquisitions.
Then the market crashed, and most corporate venture capital went with it — until now. Experts say that, thanks to bulging corporate balance sheets and a growing reluctance among traditional venture investors like state pension funds to dabble in risky investments, big companies are getting back into the game in a big way.
“Last year, traditional venture firms invested $22 billion but raised just $10 billion from investors. That’s a crisis in the making,” said Bob Ackerman, managing director of Allegis Capital in Palo Alto. He was a keynote speaker at a recent conference on corporate venture investing held in Newport Beach.
Ackerman said the conference has seen an uptick in attendance each of the past two years, reflecting the growing resurgence of corporate VC. Speakers at the forum hailed from IBM, Oracle, Hewlett-Packard, Microsoft, Philips Electronics and Merck, to name a few.
Ackerman says that a decade ago, as much as $20 billion of the roughly $100 billion committed to venture capital came from corporate shops. While last year’s total was just a shade under $2 billion, that represents a 33 percent increase over the previous year — and more importantly, it’s nearly 9 percent of all capital being committed to startups.
What’s driving the trend this time, Ackerman says, is a long-term shift in the way companies invest in research and development. With less money devoted to corporate R&D amid pressure to turn immediate profits, big companies “are having to tap into innovation externally, and their VC arms are becoming the front line.”
Read the rest of the article at MercuryNews.com
