Corporate VC Investing Drops in Q1, Mobile Funding Poised to Jump

6/28/12Follow @arleneweintraub

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Redwood City-based online fantasy game maker Trion Worlds ($85 million from media giant Bertelsmann, among others); San Francisco-based cloud computing startup Joyent ($85 million, including a contribution from British phone giant Telefonica); and Emeryville-based Lithium Technologies, which makes social-media marketing software ($53.4 million from SAP and others).

In Massachusetts, healthcare was by far the biggest winner in the corporate VC game, despite that industry’s poor national showing. Healthcare companies accounted for 62 percent of corporate dollars raised in the state. But the top three dealmakers were certainly diverse. Cambridge-based biotech startup RaNa Therapeutics raised $20.7 million from agricultural-biotech giant Monsanto and others. Cambridge analytics provider Bluefin Labs came in second, with $12 million from a group of investors that included Time Warner. And cleantech company FRX Polymers raised $11 million from the venture arm of BASF and others.

New York saw just six deals in the first quarter totaling $50 million. The biggest winners, all based in NYC, did boast some well-known corporate investors, though: Hearst Media contributed to online news publisher Buzzfeed’s $15.5 million round, Time Warner helped feed $12 million to social-TV site GetGlue, and BlueCross and BlueShield’s venture fund participated in Hello Health’s $10 million funding, which the startup is using to market its electronic medical record platform.

According to CB’s analysis, corporate venture investors are being picky in how they select deals. In the first quarter, they invested mostly in later-stage rounds, taking only a 35 percent share of seed or Series A rounds. And they didn’t like to be the lone wolf in too many investments; over 90 percent of all deals that involved a corporate VC arm included an average of three other investors.

That said, once a large corporation decides to invest in a startup, it can be quite generous. And that hasn’t changed much over the last year. The average deal size for corporate VCs was $13 million in the first quarter—about even with the same quarter last year. But the overall deal size across all of venture capital fell year-over-year, from $10.2 million to $7.5 million. It’s as sure a sign as any that as they embark on the difficult quest to raise money, entrepreneurs will continue to knock on the doors of large companies.

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