We’ve been increasingly asked to opine on Digital Industry venture investing. Invariably, the conversation touches on the importance of Corporate Venture Capital (so-called CVCs, or ‘strategic-driven’ investors), who have been thought to dominate such sector investments.
A common story is that an investment by a CVC is a likely path to commercial traction, technical partnership, and ultimate acquisition.
Evidence however is mixed. Quantitatively, CVCs participated in just 16% of IoT deals over the past 12 months per Pitchbook. While the returns of CVC funds are rarely published, anecdotal evidence suggests they are well below that of so-called ‘financially-driven’ Venture Capital. Equally mixed is the value of having a CVC on your cap table or board. At best it brings synergetic partnership value, at worst it can be viewed by the market as a ‘soft acquisition’, limiting value potential.
What is undeniable is that partnership is critical to the success of startups in Digital Industry, with the Industrial landscape dominated by a handful of regional Operational Technology and global Information Technology giants.
So how does one access such partnership value without the risk and overhead of direct corporate investment? Enter “Co-Creation Venture Capital”, a new breed of CVC. Backed by corporate funds but managed by performance-oriented deep industry partners who focus on driving financial return by ‘co-creating value’ between the startups, strategic fund investors, and the broader ecosystem.
This is how we operate at Momenta, driving upper quartile fund returns for our investors, and direct value for our portfolio of 48 companies. Stay tuned as we discuss more over the next few months.
Momenta is the leading Digital Industry venture capital firm accelerating digital innovators across energy, manufacturing, smart spaces, and supply chain. Led by deep industry operators across its venture capital, strategic advisory, and executive search practices, Momenta has made over 50 investments with notable exits to SAP, PTC, and Husqvarna.
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