Room for growth for corporate VCs

According to a new report from the European Private Equity and Venture Capital Association (EVCA), corporate venture funds invested more than E1bn in Europe last year.

The report, the first covering corporate venturing, said corporations raised E2.5bn of venture capital and invested in 632 unquoted companies. 85 companies participated in the survey. EVCA said these corporations were believed to be among the most active corporate players in European venture capital.

The figures suggest that corporate venturing in Europe still makes up a relatively small portion of the unquoted investment market. The amount invested by corporates pales in comparison with the E34.9bn that were invested in private equity in 2000 across the market as a whole.

Whether corporates will play a greater role in venture capital in the future remains to be seen. Ed Siegel, manager of corporate venturing at Philips Electronics in Amsterdam, said: “There is certainly room to expand, and it will be interesting to see how much corporate venturing takes up of the whole private equity market going forward,” he said.

Siegel added that investment in 2001 was likely to add up to a lower total, saying that it was “difficult to put too much stock in the 2000 figures. They are an anomaly.” Several corporations responded to the market downturn in 2001 by scaling back their allocations to venture capital, and it is expected that the total for the year will be more in line with funds invested in the 1998 and 1999.

In 2000, high technology was the dominant sector attracting corporate VCs, with 23 per cent going into software firms, 18 into internet technology businesses and 14 per cent into telecoms ventures.

The most active countries were France, Germany, the UK and Sweden, and the average investment team comprised seven managers and support staff.

Banks, pension funds and other corporates contributed E1.7bn to the fundraising, nearly double the amount from parent organisations, which invested E875m.