Appetite wanes for corporate venturing

Two reports published this week highlight the scepticism of Europe’s largest businesses towards corporate venture investment, presenting opportunities to secondary buyers.

Data published by the European Venture Capital Association reveals a major fall in European corporate venture capital investment in 2001.

Direct investment by European businesses fell by over 45 per cent in 2001 to E544m, compared with E1bn invested in 2001. The number of deals completed fell by 25 per cent, with the average investment per transaction falling to E1.14m.

The loss of enthusiasm for venturing is also borne out in the level of funds raised from third-party investors. In 2000, the amount raised outside stood at E1.7bn, although by 2001 this had fallen to E179, a fall of 89 per cent.

The EVCA report comes in the same week that UK corporate venture advisory firm Corven published a report suggesting that 87 per cent of FTSE 250 companies remain unconvinced that it is possible to commercialise corporate venturing initiatives.

The Corven annual growth survey suggests that many venturing divisions were established as money-making initiatives that have suffered from a lack of exit opportunities. The report adds also indicates that the most successful venture investments occur with investments that add value to the parent’s core business and generate earlier profits, rather than building large revenues.

The rise and fall of corporate venturing worldwide has left frequently left corporates with portfolios of investments which they no longer wish to service. This has paved the way for secondary buyers to step into the breach. Firms such as Coller Capital and Pantheon Ventures, which recently acquired the 18-company technology portfolio of Quantum Corp in an $11m transaction, have been the biggest beneficiaries of the move away from venturing.

Despite the broader sense of pessimism in the venturing market, a number of large European institutions have established corporate venturing units in 2002. Siemens has launched its latest venturing fund, the Siemens Mobile Acceleration fund, which will invest in start-up companies in Europe, Israel and China. Deutsche Telekom announced last month that it was planning to restructure its venture E500m venture activities to accommodate them within the company’s corporate structure.