More and more companies are investing in startups. But as a study shows, the right strategy is still lacking in some areas when it comes to investing money in young tech companies.
In 2017, approximately 38 billion dollars — equivalent to 33 billion euros — were invested by corporations worldwide in startups, so-called corporate venture capital. This shows a recently published study by the consulting firm BCG.
More and more companies are investing — strategy needs improvement
The majority of the invested capital still comes from institutional investors. According to the study, corporate financial commitments account for only 26 percent of the total $147 billion in venture capital deployed.
Nevertheless, the study concludes that there has been a steady increase in corporate investments over the past five years, rising by approximately 31 percent annually. Although most of this activity has come from the US and Asia, a certain upward trend is also evident in Germany. Yet there is still plenty of room for improvement.
“Although investments have matured considerably, there remains much room for improvement,”
quotes the Business Week Founder the authors of the study.
Corporations prefer later-stage startups
The study's authors see room for improvement, particularly when it comes to investment strategies. The study found that planning is often too short-term, with a focus on quick profits. They call for more foresight from companies, who should also ensure that the startups they invest in fit their own transformation plans.
The study also found that companies tend to favor "surefire" investments, meaning they prefer to invest in later-stage startups that have already proven their business model works. In this case, companies are happy to dig a little deeper into their pockets.
