Private Equity News & Analysis

Corporate venturers and VCs can work together

At least 72 new corporate venture funds have come to the European Market since June 2000 - an opportunity rather than a problem for VCs?

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Since June 2000, at least 72 new corporate venture funds run by large organisations such as Bertelsmann, Lloyds TSB, Orange and Nokia have been launched in Europe, according to data assembled by FirstStage Capital (FSC). The funds have a combined spending power of E4.8bn.

“This is a strong indication that the growth experience in the USA, from $392m in 1996 to $18bn in 2000, will be emulated in Europe, despite the market’s present cautious sentiment,” said FSC in a statement, citing Tornado Insider, Venture Economics and the European Commission among its sources.

A recent seminar on corporate venturing concluded that: “The climate is right for venture capitalists and corporate venturers to work together as friends rather than foes”. The panel agreed that the potential financial rewards for both were high, with productivity and maintaining competitiveness added bonuses for the parent corporations.

The panellists at the seminar which was organised by FirstStage Capital and CMS Cameron McKenna included: Christian Hackett of Enron Broadband Investments; Dr Simon Murdoch, founder of Episode 1 Partners, Pierre Suhrcke, a director of Deutsche Bank eVentures and Norman Fiore, a partner at Reuters Greenhouse Fund.

According to the organisers of the seminar, delegates suggested that many of the issues in venture investing such as oscillating valuations, remuneration, staying power and timing are common to all types of venture capital investors. A key difference they saw in motivation, with corporate venturers keen to do strategic investment in new technologies which their own organisations can then access.

FSC chief executive Jason Purcell said: “Corporate venturing offers benefits in allowing traditional companies to keep pace with fast changing technology and exploit potential returns to be gained. While some cynics may say the corporates are jumping on the VC bandwagon, having seen record returns we believe they are here to stay as a force in European venture capital.”