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Chapter8.CorporateVenturingBytheNumbers–AnandSanwal&JonathanSherry,co-foundersofCBInsights“Successbreedscomplacency.Complacencybreedsfailure.Onlytheparanoidsurvive.”-AndyGrove"Seektruthfromfacts"firstappearedintheBookofHanandwaslatermadefamouswhen quoted by Mao Zedong and later Deng Xiaoping. Here in this book, we godirecttothesourceoftheactivityandprovideinsightsfromthekeypractitioners.Thischapterletsthefactsspeakforthemselves.AnandSanwalandJonathanSherryat CB Insights were cool enough to share their quantitative research and leaguetablesforyoutounderstandcorporateventuringbythedataandfacts.Moreinfoatwww.cbinsights.com.ThenumberofactiveCVCsnearlydoubledfromQ3’12toQ3’15.Arecord185corporateVCfirmscompletedaninvestmentinQ3’15,representinga31%year-on-yearincreaseandajumpof97%fromthe94firmsmakinganinvestmentinQ3’12.

In2015,126uniqueCVCarmsparticipatedinatleastoneseedVCroundworldwide.Thatrepresentsafourfoldincreasefromthe30corporateVCswhocompletedsuchdealsin2011.

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85newcorporateVCunitsgloballymadetheirfirstininvestmentin2015,includingnotablenamessuchasTwitterVenturesandWorkdayVentures.Thiscontinuesasteadilyupwardmarchinnewparticipantssince2010.

Themostactivecorporateventurecapitalgroups.IntelCapitalledallCVCsinglobalactivity,investinginmorethan75companies,roughly18%morethansecond-placeGV(GoogleVentures).Theyhavebeenaggressivelyinvestingabroad,withabout32%oftheir2015investmentsmadeincompaniesoutsidetheUS.

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*Includesinvestmentsin2016YTD.NoteRubiconVentureCapitalco-investedwithIntelCapitaintoLISNR.2015 saw corporate VC investors participate in $28.4bn of funding across 1,301deals,topping2014’srecordnumbers.However,asoverallventureactivityslowedinQ4’15, corporatespulledback aswell,withdeal activitydropping to its lowestlevelsinceQ1’14.

NorthAmericanstartupstookoverhalfofthedealswithCVCparticipationineachofthefivequartersanalyzed.However,NorthAmericandealsharesteadilydroppedthroughout2015,withno.2Asiaandno.3Europebothseeingupticksindealshare.

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Q1’15representeda5-quarterlowforearly-stage(seed/SeriesA)CVCactivity,withdealsdroppingto43%whileSeriesD+roseto14%ofthetotal.However,byQ4’15late-stagedealshadpulledbackto10%ofCVCdeals,whileearly-stagedealsreboundedto50%.

Despitefluctuationsinabsoluteshare,theinternetsectorremainedthetoprecipientofglobalCVCdeals,taking48%oftheminQ4’15.Dealsharetomobile&telecomstartupstoppedtheshareforhealthcarein4outofthepast5quarters.Despitefluctuationsinabsoluteshare,theinternetsectorremainedthetoprecipientofglobalCVCdeals,taking48%oftheminQ4’15.Dealsharetomobile&telecomstartupstoppedtheshareforhealthcarein4outofthepast5quarters.

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Beyonddedicatedventurearms,corporationsthemselvesarealsofunnelingdollarsdirectlytoVC-backedstartups.LedinactivitybyChineseheavyweightslikeTencentandAlibaba,corporatesparticipatedin668dealsthatrepresented$26.9bnoffundingin2015*.

ThemostactivecorporateventurecapitalgroupsinvestingintheUS.WithaUS-centricportfolio,GVtradedplaceswithgloballeaderIntelCapitaltoclaimthetopspothere.SalesforcealsoswappedplaceswithQualcommVenturestoplacethird.

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CountryRecaps:UK,ChinaandIndiaCVCstookpartin$1.7bnofinvestmentacross41dealstoUK-basedprivatecompaniesin2015,representingasharprisefrom2011(22dealsand$203M).Someoftheyear’slargestdealsincludeJuly’s$460mSeriesHtoO3BNetworksanda$320mfinancingtoImmunocore.

Corporateventureunitsparticipatedin$6.2bnoffinancingsacross66dealsinChina,risingfromjust$910mand57dealsin2014.CVCswereprominentin

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megadeals,includingan$850mSeriesEtoDianpinginAprilanda$2bnSeriesFtoDidiKuaidiinJuly.

CVCactivityrecededinIndiain2015,downfrom$443mand29dealsin2014to$421macross24deals.Q3’15wasastrongquarter,with10deals,butfundingwasdrivenbya$100mroundtohomefurnisherPepperfryanda$90mroundtodoctorsearchportalPracto.

QualcommhasbeenactivelysourcinginvestmentsfromoutsidetheUS,rankinginthetop5investorsineachofthesemarketssince2011.IntelwasthemostactiveinbothChinaandIndia,whileBertelsmann’sinvestmentarmsalsomakeappearances.

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CorporateVCsparticipatedin806dealsrepresenting$17.4bnoffundingtoUS-basedcompaniesin2015.Fundingdollarsrose33%intheyear,butdealgrowthnearlyflat-linedatjust2%.TheQ4’15year-endslowdownsawthefewestCVC-backeddealssinceQ4’13.

CaliforniatakesoverhalfofUSCVCdealsin2015.AsidefromaQ1’15diptobelow50%share,theGoldenStatecontinuedtodominateUSCVCdealactivity,securing51%ofUSdealswithCVCinvolvementin2015overall.NewYorkedgedoutMassachusettsbyasingledealtosecuresecondplacefortheyear.

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SeriesBactivityonlymadeup17%ofUSCVCdealsinQ4’14,butgrewto28%inQ4’15.Mid-stage(SeriesBandC)tooka38%shareinthatquarter.ApartfromapeakinQ3’15,seed/angelactivitytookunder20%ofdealsdonebyCVCarmsintheUSin2015.

HowdoescorporateventurecapitalmeasureuptothegreaterVCecosystem?CVCsparticipateinafifthofallVCdealsin2015.Corporateventurefirmsparticipatedin19.3%ofthe6,743venture-backedfinancingroundsin2015,comparedtoaparticipationrateofjust16.5%in2013.

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Onaquarterlybasis,CVCdealsharetoppedoutat21%inQ3’15,whichwasthefrothypeakforVCfundingoverall.

CVCdealsizescontinuetooutpaceVCoverall.AveragedealsizewithCVCparticipationhastopped$21m+for3consecutivequarters,includingaQ3’15spikebolsteredbymonsterdealstoDidiKuaidiandSoFi(amongothers).

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TheaveragesizeofdealswithCVCparticipationwaslargerthanoverallUSVCdeals,mirroringtheglobalpattern.TheaveragesizeofdealswithCVCinvestorsstayedunder$16mthroughout2013,butwasabove$21minfinal3quartersof2015.

Since2011,KleinerPerkins,NEA,andAndreesenHorowitzhavecompletedthemostdealsalongsideacorporateventurearm.

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IntelCapitalrankedfirstbynumberoftechexitsforthethirdstraightyear.Ithadmorethandoubletheexitsofsecond-placeGV.

ComparingselecttechCVCs

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ComparingselecthealthcareCVCs

ComparingselectmediaCVCs

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ComparingselecttelecomCVCs

ComparingselectfintechCVCs

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100MostActiveCorporateVentureCapitalFirmsof2015(global)

100MostActiveCorporateVentureCapitalFirmsof2015(US)

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