Venture forth: How five of the biggest tech companies explore new territory through early-stage investments
Once venture capital-backed startups themselves, today’s tech giants know a thing or two about VC seed money. It’s fitting that many of them have created corporate venture capital groups of their own. These CVCs help their owners experiment and nurture new technologies and ideas in the early stages, without requiring the commitment of an acquisition.
The CVC strategy often augments a company’s research and development efforts as well as complementing its M&A strategy. Middle-market dealmakers would be wise to track the VC investments of the five companies we highlight in this story: Amazon, Google, Intel, Microsoft and Salesforce.
A CVC fund can be formed either as the independent arm of a corporation or as a dedicated fund within the same company. In the past, strategic buyers invested only in tech companies that directly fit with their core products. But as time went on, CVC funds started behaving more and more like traditional venture capital funds.
Using venture capital has advantages for strategic buyers. One is that they can gain access to new technologies while doing due diligence for potential deals.
Corporations are partnering with AI startups in particular as they look for companies that will help them compete with new players.
For example, Microsoft has partnered with KenSci, which developed AI software that predicts care and cost risks for patients. AI startups raised a worldwide record of $26.6 billion in 2019, compared to about $22 billion in 2018, according to CB Insights.