October 18-20 | Tucson, AZ

The Research Institution GAP Fund and Accelerator Program Summit

More companies are starting venture divisions

Get our GAP Insights Newsletter

Join Upcoming Events

October 18-20, 2023 / Tucson, AZ
The annual summit for research institution gap fund and accelerator programs, including proof of concept programs, startup accelerators, and university venture funds

The Story

San Francisco startup GoodData raised nearly $26 million in a funding round Thursday, but the lead investor wasn’t a traditional venture capital firm.

It was Intel Capital, the global investment organization for the Santa Clara chipmaker. More companies are following Intel’s example by setting up divisions that specialize in funding promising startups. There are more than 1,100 such corporate venture firms, with more than 475 created since 2010, according to media firm Global Corporate Venturing.

As new technologies disrupt industries from transportation to retail, more companies want to take part in — and profit from — the innovation. Investing in startups could lead to future acquisitions or partnerships that could benefit large businesses.

“Many corporations feel like it’s essential for them to engage with the startup communities, otherwise they are going to get blindsided,” said Mark Radcliffe, a partner with law firm DLA Piper, who has represented companies in their venture capital transactions.

Unlike traditional venture capital firms, companies don’t have as much pressure to get a high return on their investment under a tight timeline, Radcliffe said. This can be beneficial for startups in industries such as clean tech or life sciences, which face more government regulations, he added.

Many Silicon Valley tech firms have related investment groups, including Google Ventures, Salesforce Ventures and Intel Capital, but their strategies can vary.

For example, Google Ventures said it receives $300 million a year from Google to fund U.S. companies. It focuses on getting a financial return and doesn’t view its porfolio companies as strategic investments for Google. Google Ventures has more 250 companies in its portfolio and $1.6 billion under management. Its companies also get access to designers and engineers.

Some companies like Salesforce.com are using investments as a way of expanding the use of its products. Salesforce Ventures primarily invests in startups that are building on its Salesforce1 Platform, said John Somorjai, executive vice president of corporate development and strategy.

Somorjai said the primary goal is finding companies that “extend the power of the Salesforce1 Platform and help us deliver the next generation of technology for our joint customers.”

Universities are also stepping into the venture capital game. Stanford opened its venture fund in 2013 and the University of California recently announced that it will create a $250 million venture fund to support startups run by students and faculty.

Some startups, including analytics firm GoodData, said getting money from large organizations like Intel Capital has been advantageous. GoodData CEO Roman Stanek pointed out that Intel Capital has a strong portfolio in cloud computing and big data, which closely aligns with his company.

“We like to be associated with that portfolio,” Stanek said.

But getting large companies to notice new technology can be challenging. Some turn to San Francisco advisory firm SherpaFoundry, which tries to connect large corporations with promising entrepreneurs. Companies pay a membership fee to use SherpaFoundry’s services and meet with startups like Do, a platform that helps people better organize and share meeting notes that received $200,000 in seed funding from Salesforce.com.

“It’s very important for large companies who are the leaders in their space to keep close tabs on the new methodologies, new best practices and new talents in their domains” as innovation continues to impact their industry, said Tina Sharkey, CEO of SherpaFoundry.

via More companies are starting venture divisions – SFGate.

Get the Report

More GAP News