Investing in external startups is a culture that corporates are increasingly starting to favour. Despite being a relatively new way of investing in the future of companies, corporate venture capital (CVC) has become a well-established corporate development endeavour—with the funding continually increasing; at the same pace as M&As and R&Ds.
Corporate venture capital, sometimes referred to as corporate venturing, has existed for more than a century. Back in 1914, Pierre S. Du Pont’s business put some money into General Motors and that investment pretty much set the ball rolling for the CVC industry. Nevertheless, much has changed since 1914, chief among which is the realization that CVC-backed funding deals have multiplied in size and numbers.
In 2020, funding backed by corporate venture capital catapulted to a record height of USD 73.1 Bn. These figures, according to CB Insights, represent a 24 percent jump from the CVC values recorded in the previous year (2019). Companies such as Google, Intel, Salesforce, Qualcomm, Comcast, Dell, Microsoft, and Nokia have jumped on the trend by creating VC arms with funds deployable to a select crop of scalable startups.
While firms like SuperAwesome, FarEye, Zoom, Spyce, Trace and Amenity bask in the reception of CVC investments in elsewhere markets, corporate investments are also taking root in the African context. Google Ventures (Google’s investment vehicle) has backed Tala and Zipline, San Francisco-based Salesforce has invested in Samasource and Andela, and local corporates such as Naspers have been backing problem-solving South African tech startups since 2019.
The African venture capital terrain has changed in the last few years, and now there is an evident influx of corporate-facilitated VC funds combined with the other kinds of funding opportunities available to the region’s startups. Corporates are starting to warm up to innovation-driven early-stage ventures building from the continent. That has opened a window through which startups can collaborate with the CVCs that best understand their trajectories and acts as consolidation for the new products being built for the world’s last frontier market.
In the fourth episode of Africa Tomorrow, we trace the flight path of CVC investments in Africa since the 2000s and pontificate on what could become of the relatively new but absolutely critical funding landscape between now and 2025. Are the continent’s corporates now more ready for startup deals and are the early-stage firms prepping up to the avenue?
Do join Herman Singh, the CEO and Founder of Future Advisory—who played a salient role in the NYSE listing of JUMIA—as he talks about the present and future African CVC in the latest Africa Tomorrow instalment.