The so-called CVC refers to Corporate Venture Capital, a corporate venture capital fund. Different from the well-known "venture capital", CVC is set up by the enterprise to set up a venture capital department, using the free non-financial funds of the enterprise to invest, the investment target is the strategic development goal of the enterprise or the small and medium-sized enterprises in the upstream and downstream of the industrial chain.
Although many people have only begun to hear about CVC in the past two years, in fact, as early as 100 years ago, the United States has begun CVC investment. In 1914, DuPont invested in General Motors, which had only been established for six years. This "operation" of DuPont ushered in the era of CVC investment.
According to CB Insights, U.S. CVCs achieved 142 percent growth in 2021, amounting to $169.3 billion. And in 2021, the volume of CVC investment has also expanded a lot, with 470 financing rounds of $100 million + in 2021, an increase of 291 over 2020.
Image source: CB Insights
Outside the United States, CVC investment in Latin America, Europe, and Asia also showed a growth trend, of which Latin America increased by 647%. In Asia, CVC investment increased by 154% between 2020 and 2021, mainly in China, India and Israel.
China's CVC started late, but in the past 10 years, China's CVC development has entered a stage of rapid development, especially the Internet CVC, which benefits from venture capital and is also keen to establish CVC. IT orange data shows that 21% of CVC entities in China are Internet companies.
However, as the country wields the anti-monopoly knife, the pace of Internet CVC is slowing down, on the other hand, industrial capital is rising, and CVC has entered a new era.
First, the "rich and powerful" American CVC
The spread of the epidemic has exacerbated global uncertainty, and while the real economy has been frustrated, CVC has ushered in a "big outbreak".
The data shows that 221 new CVCs will be established in the United States in 2021, an annual increase of 55%.
Nowadays, both large and small companies have begun to establish CVC. In particular, companies such as Meta (Facebook), Google, Apple, and Microsoft are themselves "rich" and "leading the way" in investment, and the data shows that since 2020, these companies have made more than 10 acquisitions.
In 2020, Meta acquired 7 companies, and in 2021, it acquired 5 companies, such as Sanzaru, Scape Tech, Readyat dawn, Lemnis Tech, etc., most of which are related to games or metaversics. Apple acquired 9 companies in 2020 and 2 acquisitions in 2021.
Microsoft is the more "crazy" representative of this, in 2020 and 2021 two years it has acquired 23 companies, the acquisition of more types of enterprises, including 5G, IOT, network security, but also media, games, content.
In January, Microsoft revealed that it was going to buy Activision Blizzard for $68.7 billion, stirring up a thousand waves. According to Blizzard's 2021 financial report data, its net income in 2021 increased by 8.87% to US$8.803 billion (about 56 billion yuan), ranking 373rd among the top 500 companies in the United States in 2021.
It is precisely because of the participation of "local tycoons" such as Microsoft that the amount of CVC investment in the United States in 2021 is also rising. CB Insights' report shows that the most obvious change in U.S. CVC investment in 2021 is the increase in investment volume, with activity in mega-rounds ($100 million+) rising, from 179 in 2020 to 470, an increase of 163%.
In terms of investment track, the most favored field of CVC in the United States is Fintech, with an increase of 202% to an amount of 33.2 billion US dollars; followed by retail technology, and finally digital health.
However, from the acquisition of several companies mentioned earlier, what type of company the enterprise acquires is not necessarily the "money" scene of the track, but also may be to enhance its own corporate strength, or even to achieve a monopoly position in the track, Meta is a typical representative of this type of enterprise.
Outside the U.S., CVC is equally active.
According to the Mid-2021 Global CVC Report released by CB Insights, global CVC investment reached $79 billion in the first half of 2021, exceeding the record of $74 billion set in 2020. Following this trend, the amount of CVC support worldwide is expected to reach $158 billion in 2022.
Financing from Mega-rounds ($100 million+) surged in the first half of 2021, accounting for 10% of all CVC deals, up from just 5% in 2020. Mega-rounds ($100 million+) also saw an increase of 179% in funding rounds from 78 in the first half of 2020 to 218 in the first half of 2021.
From the perspective of the whole year, Latin America's CVC grew the fastest, with an increase of 647%, Europe increased by 170%, and the situation in Asia was no less, with CVC in Asia growing by as much as 154% to $49.8 billion from 2020 to 2021, represented by China, India and Israel.
Second, China's Internet CVC top half of the sky
Although CVC has only begun to be known to ordinary people in the past two years, in fact, the development of CVC in the mainland has gone through more than 20 years.
In 1998, Boji Software, together with other VCs, invested in the establishment of Brocade Information, a company that researched and managed software engineering automation, which was considered to be the first CVC investment in mainland China. Later, in 2000, Yonyou Happiness Investment invested in a wealth management software company in Chengdu, Sichuan Province. In the same year, Alibaba, which had just been established for a year, invested in Haier's "Haier Zhijia", heralding the beginning of mainland Internet CVC.
The decade that followed was a preliminary "trial phase" of mainland CVC, little known. Until the beginning of 2011, the mainland CVC stood at the cusp of the times and began to develop rapidly, and the foreign investment of Internet companies such as Tencent, Ali, and JD.com began to attract people's attention.
Today, Internet CVC has become the "main force" of mainland CVC investment. According to IT Orange data, 21% of the CVC main companies in the mainland are Internet companies, followed by manufacturing companies accounting for 15%, media companies accounting for 9%, games and software companies accounting for 6%, electronic equipment companies accounting for 5%, and other companies accounting for less than 5%.
This 21% of the number of Internet CVC outbound investments accounted for 58% of the number of domestic CVC outbound investments. In terms of investment activity, Internet companies are also far ahead. The first in terms of activity is Tencent Investment, with 1175 outbound investments, followed by Xiaomi Group with 408, Alibaba with 387, Baidu and Baidu Venture Capital with 324, and Qihoo 360 with 241.
Internet CVC is in the forefront and the Internet companies themselves are involved in contact with venture capital earlier, and their own experience plus the development trend of the market make Internet companies more enthusiastic about establishing CVC. IT Orange data shows that Internet companies founded after 2011 have invested an average of 2 years after they have been established, while traditional companies have taken 14 years to get to this point.
However, with the raising of the anti-monopoly banner, the mainland Internet CVC has "converged" in the past two years. At the end of last year, Tencent reduced its stake in JD.com by "dividend"; on January 18, Alibaba Entertainment was exposed to withdraw from Youku shareholders; on January 19, the "Daily Economic News" reported that ByteDance's strategic investment department had been dissolved on the evening of the 18th.
There is a long way to go. Internet CVC is shrinking, industrial capital has become active, and companies like Huawei and Ningde Times have accelerated the pace of investment.
According to the data of Tianyancha, since entering 2022, CATL has invested in 5 enterprises, such as Ammaison, Dongheng Energy, Core Vision, Qiyuan Core Power, and Times New Energy Mining, involving mining, power equipment, battery materials, robots and other different fields.
At the end of last year, Hubble Technology Venture Capital Co., Ltd. completed the registration of private fund managers, the type of institution is private equity, venture capital fund manager, the registered capital and paid-up capital are 3 billion yuan. The Huawei-based venture capital is about to start issuing funds to raise funds.
In summary, the mainland's CVC has entered a new stage.
Third, the internal logic of CVC's rapid expansion
Nowadays, the volume of CVC can even be equal to VC, FTX's Cryptocurrency fund size of 2 billion US dollars, Tencent industry supply fund has also increased to 10 billion yuan. For most companies, the establishment of CVC is not only to "race the ground", but also has other deep meanings.
On the one hand, these companies have completed the accumulation of upfront original funds. Ordinary individuals have money will take it to invest, enterprises have money is the same, money to make money to really make money, enterprises instead of idle these funds, it is better to take out investment, looking for the second growth curve.
Microsoft is like that. As mentioned earlier, Microsoft invests in a wide range of areas, including linkedIn, a world-renowned recruitment platform. Five years after the acquisition, LinkedIn's annual revenue exceeded $10 billion, and Microsoft originally bought LinkedIn for $26 billion. More importantly, LinkedIn's revenue is still in a period of growth. According to Microsoft's fourth quarter 2021 earnings data, LinkedIn's revenue growth is expected to reach 30% in 2021.
On the other hand, the establishment of CVC can help enterprises build a complete ecosystem. For example, Country Garden Venture Capital, although it was only established in January 2019, the investment after its establishment revolves around scientific and technological innovation, great health, consumption and the upstream and downstream industrial chain of Country Garden Group. For real estate enterprises, starting a house is only the first step, and the follow-up can also develop projects such as property management and life services.
Poly Capital's investment also reflects this truth. In 2017, Poly Capital invested in SenseTime. SenseTime is an artificial intelligence software company, while Poly is a real estate company, although in different fields, but there are places to combine. After the cooperation, the face recognition set up by each real estate of Poly Real Estate was completed by SenseTime.
Pharmaceutical giant WuXi AppTec has also continued to strengthen its strength in the medical industry, and its 53 foreign investments have basically occurred in the medical industry.
Such investment cooperation, whether for the investment enterprises or the invested enterprises, most of the advantages outweigh the disadvantages.
However, there are rumors that CVC is just a "passer-by" of the invested enterprises, and it comes and goes fast. In fact, this is not the case, especially for enterprises in the same industrial chain, CVC brings funds to the stolen enterprises at the same time, but also brings them resources. In 2021, Poly Capital will use the resources of its own system to help the invested construction plastering robot company find test scenarios.
One side has money and resources, the other side lacks gold and resources, and the two sides hit it off, isn't this the best embodiment of win-win?