Corporate VCs Who Buy High And Sell Low

from the understanding-the-reasoning dept

For years, we've been following the ups and downs of the corporate VC market. In many ways, it followed the regular VC market. Corporate VC offerings were incredibly popular during the boom years when it seemed like the stock market was taking dot coms in one end and spitting billion dollar bills at the other. However, as the original dot com bubble burst, many companies had a tougher time justifying their VC arms, and shut them down. In many ways, that's the exact wrong time to do so. It only makes sense if the purpose of the corporate VC program is to make money on the direct returns from the investment. Getting good returns is certainly important, but it shouldn't be the core reason for a corporate VC program. It doesn't play to what differentiates them from pure VCs. A good corporate VC offering is focused on finding investments that are complementary to their core business. So, the purpose is more about investing in companies that can help grow the overall market, rather than just for the direct returns. If that's the case, the best time to be doing corporate VC work is when all the other VCs aren't doing anything and the public markets are shy about taking startups public. That makes it easier to find good companies and to invest in them and help them actually grow. That seems to be exactly what some new research is showing. The real benefit of corporate VC work isn't directly in the returns from those investments, but when those investments help grow the overall market demand by being complementary. Of course, now that it looks like a new bubble is expanding, expect to see many more corporate VCs jump back in, just as the price of investing starts to skyrocket.