BCG: Corporate Venturing gaining popularity again

‘Corporate Venturing’ is a growing trend among large organizations. After years of shrinkage, the expansion of the corporate venturing market has returned to the level of 2005. This is concluded by The Boston Consulting Group (BCG) in the report ‘Global Corporate venturing’.

Corporate Venturing

Corporate Venturing is defined as a process by which large organizations invest in small external parties like innovative start-ups or specialized enterprises.  Organizations use corporate venturing not only for the financial profit, but also to expand their R&D effort, penetrating upcoming markets and gaining access to new technologies.

Technology sector at forefront

According to the consultants of BCG, the technology sector is most active in Corporate Venturing. 70% of large technology concerns invest risk capital in innovative ideas of external start-ups. Five years ago only 50% was involved with this kind of investments. The pharmacy industry is listed second with 63% of active firms (five years ago 50%).

Furthermore, this industry is followed by the telecommunication industry (with a growth from 37% to 57%) and the media industry (from 27% to 50%). In the car industry the number of firms applying a Corporate Venturing-strategy rose from 26% to 33%. The consumer goods sector showed a growth from 13% to 30%, and in construction, activity doubled from 10% to 20% of the firms.

R&D fallen by the wayside

Increasing investments in external partners logically go hand in hand with cutting own budgets for research and development.  For example, the strategy advisory firm calculated that in-house R&D budgets have dropped in the past five years with 1,5% in pharmacy and 0,5% in the technology sector.