In recent years, corporate venture capital (CVC) investors have solidified their position as a reliable source of venture capital funding. The number of companies launching investment arms has exploded, and the amount of new funds continues to rise despite market volatility.
Ulta Beauty Joins the Ranks
Ulta Beauty, the largest chain of beauty stores in the U.S., has become the latest company to launch a venture arm. Prisma Ventures will tap a $20 million fund to back early-stage companies that have the potential to improve the online or in-store shopping experience for Ulta customers.
According to Ulta’s chief digital officer, Prama Bhatt, the decision to launch a venture fund was motivated by the company’s desire to foster innovation. "If we think about our purpose, which is to shape the future of the beauty landscape, it seems appropriate to continue that vision by working with startups," Bhatt told TechCrunch.
A Growing Trend
Ulta is just the latest corporate venture fund to launch this year. Consumer-focused companies such as The Home Depot and Chipotle have also announced funds, while corporations ranging from drug wholesaler AmerisourceBergen to defense consulting firm Booz Allen Hamilton have debuted funds. Just these four funds bring $450 million to the table.
The Rise of CVCs
Corporate venture capital investors have significantly upped their investment game over the past two years. Last year, these investors participated in deals worth a collective $149.6 billion, more than double 2020’s record $77.6 billion, according to PitchBook data.
While funding thus far this year ($57 billion) doesn’t look likely to top last year, it is already 73% of the way to matching 2020’s total. This trend suggests that CVCs are a reliable source of funding, even in uncertain market conditions.
A Bright Spot in a Slowing Market
It may seem like an odd time to launch a fund amid the overall venture capital funding slowdown and economic uncertainty. However, more corporate venture dollars may be welcome in the current market as these investors remain a relatively stable source of funding while many firms are sitting out.
According to data from PitchBook, CVCs participated in 613 U.S. venture deals worth a collective $23.6 billion in the second quarter. This represents a decline from Q1 but indicates that CVCs are actually cutting more checks than their traditional counterparts.
A Shift in Investor Dynamics
The percentage of deals that include a CVC investor reached its highest number yet in Q2, at 25.7%. This compares to hovering between 24% and 24.8% for the prior four years.
Meanwhile, crossover investors, which had flooded the market in recent years, have slightly minimized their presence by deal count and drastically decreased their presence in large deals. Crossover investors were involved in deals that represented 30% of the capital invested in Q2, down from 45.9% in Q4.
Corporate Venture Capital: A Reliable Source
The rise of corporate venture capital is a trend that shows no signs of slowing down. With more companies launching investment arms and a growing pool of funds, CVCs are becoming an increasingly important source of funding for startups.
In a market where traditional VC funding is becoming scarcer, CVCs offer a reliable and stable source of capital. As the venture capital landscape continues to evolve, it’s clear that corporate venture capital will play a significant role in shaping the future of innovation.
Key Takeaways
- The number of companies launching investment arms has exploded, with many consumer-focused companies entering the CVC space.
- Corporate venture capital investors have significantly upped their investment game over the past two years, participating in deals worth a collective $149.6 billion last year.
- Despite market volatility, CVCs are a relatively stable source of funding, participating in 613 U.S. venture deals worth a collective $23.6 billion in the second quarter.
- The percentage of deals that include a CVC investor has reached its highest number yet, at 25.7% in Q2.
As the venture capital landscape continues to evolve, it’s clear that corporate venture capital will play an increasingly important role in shaping the future of innovation.
