Corporate Venture Activity Rebounds After Slump in Deals and Dollars

9/20/12Follow @bvbigelow

Corporate venture capital investments started strong and stayed high during the second quarter, with $2.1 billion invested in innovative startups throughout the United States during the three months that ended in June, according to a survey released today.

That’s a 16 percent gain over the $1.8 billion that corporate VCs invested during the same quarter last year, and a 93 percent leap from the first quarter of this year, when corporate venture arms invested almost $1.1 billion, according to CB Insights, a New York financial data firm that tracks venture deals.

The firm said corporate VCs participated in 118 deals, which was 9 percent fewer than the 130 deals counted during the same quarter last year—but 40 percent more than the 84 deals counted during the first quarter. The data from CB Insights showed a huge spike in funding for cleantech ventures. Funding for Internet and mobile/telecom deals also scored high. In terms of investment stage, corporate VCs participated in more seed-stage rounds than usual. Online results of the survey are available here.

Overall, corporate venture arms participated in almost 15 percent of all venture deals during the second quarter, and accounted for $2.1 billion—or almost 26 percent—of the $8.1 billion in total VC investment activity during the quarter.

Second-quarter deals involving corporate VCs were substantially bigger—$17.8 million, on average—than conventional VC deals, which have remained flat at $10 million over the last 5 quarters. Other highlights from the survey:

—California continued to be the top destination site for corporate venture capital, accounting for 58 percent of all corporate venture deals nationwide and 75 percent of the capital invested. Corporate VCs sank just $80 million (4 percent) in 12 deals (almost 10 percent) in Massachusetts, and $30 million (1 percent) in nine deals (8 percent) in New York.

—The cleantech sector attracted the most dollars—$620 million—during the second quarter. But there were only 12 deals. It was more than twice the $301 million in venture capital that went into 22 cleantech deals during the same quarter last year.

—Internet was a busy sector. Corporate venture arms invested $513 million in 48 Internet deals during the second quarter, which represented 27 percent of the $2.1 billion in corporate capital and 42 percent of the deals. But most of that money (79 percent) and most of the deals (67 percent) went to Internet startups in California.

—-Healthcare attracted $334 million from corporate VCs, who invested in 21 deals. That was a 38 percent drop from the $539 million invested during the same quarter of 2011, and a 27 percent fall in deals. Yet it represented a 93 percent increase from the $173 million invested in the first quarter of 2012, and a 50 percent gain in deals.

—Corporate investments in mobile and telecommunications ventures totaled $146.7 million during the second quarter, and there were 15 deals. California led in deals as well as dollars, but Massachusetts made a strong, second-place showing, with 13 percent of the deals and 24 percent of the dollars.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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