The number of companies entering the asset class for the first time jumped last year and the total value of venture deals featuring corporations rose, data show. The activity stands in contrast to previous periods of financial uncertainty when many corporations pulled back from startup investing, which drew ire from traditional venture firms.
The shift is yet another indicator of how the asset class is becoming increasingly attractive to nontraditional venture investors and to companies aiming to keep abreast of disruptive technology. Outsiders such as hedge funds, private-equity firms and companies are playing a larger role in deal making.
Additionally, the pandemic kicked markets such as e-commerce into overdrive and accelerated a broad migration of many services online. This heightened many companies’ interest in strategically backing tech companies that are relevant to their business, corporate investors say.
The number of first-time corporate investors in the U.S. last year jumped 43% to 744 compared with 2019, according to Global Corporate Venturing, a data provider and media publication. Meanwhile, the overall value of U.S. venture deals that corporations participated in rose 15% to $67.6 billion in 2020 from $58.8 billion, according to a report from analytics firm PitchBook Data Inc. and the National Venture Capital Association, an industry trade group.
By comparison, the value of U.S. venture deals that corporations participated in fell 30% to $6.9 billion in 2009 amid the 2007-2009 financial crisis, according to the report.
Truck leasing and supply-chain logistics company Ryder System Inc. started a venture unit last year, launching a $50 million fund to back startups. Ryder will target startups developing technology in four sectors it identifies as crucial areas of innovation: electric and autonomous vehicles; e-commerce; asset and capacity sharing services, which includes technology that allows trucks to be used for multiple purposes; and analytics, said Karen Jones, Ryder executive vice president, chief marketing officer and head of new product innovation.
The pandemic increased demand for Ryder services including last-mile e-commerce fulfillment, Ms. Jones said. It also served as a catalyst for the company to ramp up innovation efforts to get ahead of these growing demands, she said.
“If you’re not looking at disruption in this industry you won’t be around very long,” Ms. Jones said.
Startups developing software designed to streamline logistics processes and those developing autonomous freight-hauling trucks have been a recent target of investors. Ryder began using technology from venture-backed startup Turvo Inc. in 2019 to integrate various logistics processes to boost efficiency in customers’ supply chains.
In June, Massachusetts Mutual Life Insurance Co. committed $100 million to its venture division to target startups in sectors such as financial technology and cybersecurity. The new fund increases MassMutual Ventures’ assets under management to $450 million. The commitment will help the financial services firm that was founded in 1851 form connections with cutting-edge startups and increase its exposure to the asset class, managing director Doug Russell said.
Traditionally, tech corporations invested capital into startups or set up venture-capital divisions to invest out of a dedicated fund. Some startups were wary of accepting corporate money out of fear of having their ideas taken by the incumbents they were trying to unseat.
Increasingly, to help ease startups’ concerns, companies have sought to make their venture arms more closely resemble the structure of traditional firms. Many dedicate capital to funds and aim to dole out investments over a multiyear period.
In years past, corporate investors were viewed in some Silicon Valley circles as fair-weather investors, pulling back spending during crises such as the 2007-2009 recession, which hit the tech and financial sectors hard. Companies broadly bucked that stigma last year, which was a stellar year for tech broadly.
Corporate investors are now a permanent fixture in the startup ecosystem, Mr. Russell said.
While in prior decades, strategic firms might have been associated with being heavy-handed, they have largely learned to play a more participatory role, said Peter Wagner, a founding partner at traditional venture firm Wing VC.
“Most good [corporate venture investors] are flexible and fit into the transaction,” Mr. Wagner said.
This story has been published from a wire agency feed without modifications to the text.