Corporate venturers retreat

The latest data reveals that new investment has virtually halted as companies rein in their venture units.

The US venture capital research firm, VentureOne, has released data that reveals how far corporates have retreated from venture investing.  VentureOne’s numbers show that in 2001 corporate venturing investment activity totalled $522.4m, a startling reduction of over 90 per cent on the $6.2bn invested in 2000.

As numerous companies struggle to bolster flagging revenues and promise their disgruntled shareholders to focus only on core businesses, so their own incubator and venture units are being closed down and their portfolio of investee companies ruthlessly culled. According to the US publication, Corporate Venturing Report, companies have written off around $9.5bn of investment, with some firms taking some spectacular write-downs.

Unsurprisingly it is in the technology and telecommunications sectors where corporate venture units have been hardest hit: Microsoft wrote off $2.6bn whilst Verizon Communications booked a $2.9bn write down as a result of failed investments.

Private equity and venture capital funds are viewing these developments with interest. Athough some want to make the point that successful venture investing requires far more than knowledge of a sector and that this lesson is being painfully learnt by companies now, others are keen to pick up where the corporate venturers left off. Besides the secondary specialists, such as Coller Capital who bought an 80 per cent stake in Lucent’s corporate venturing portfolio in December, there are numerous other VC firms keen to get their hands on either the businesses or the personnel within them.

As one VC fund partner commented: “companies are under a great deal of pressure at present and there are some very good businesses to be had at the right price… some are going to be guilty of throwing the baby out with the bath water.”