Strategic Corporate Investments and Why Start-ups Need Them
Corporate Venture Capital (CVC) deal activity in the UK increased by 35% last year, despite global activity remaining stagnant. This signals the key emphasis that large corporations have placed on participating in the proliferation of Innovation across the UK.
Why Innovation in the UK?
- Public initiatives: Since 2007 Innovate UK has invested nearly £2bn in innovation, and the Chancellor Exchequer Phillip Hammond is to allocate more than £550m to boost innovation and technology within the UK.
- Private initiatives: £1bn Syncona/BACIT Life Science Fund, £80m Seraphim Space VC Fund.
- Academic Institutions: The Francis Crick / Alan Turing Institute and Russell Group Universities , with the UK home to seven of Europe’s top 10 universities.
The Importance for Start-ups;
- Corporates can nurture innovation: Statistically; CVC backed start-ups are characterised by an average of 25% higher innovation output pre-IPO and an average of 45% higher innovation output post-IPO when compared with independently venture backed start-ups.
- Exit opportunities: Statistically; CVC backed start-ups have a longer maturity period prior to exit and receive larger investment levels than independently venture backed start-ups. This higher level of information in the acquisition market and firm value raises both the likelihood of acquisition and IPO exit.
The Importance for Corporates;
“By investing in innovative companies, your organization can access innovative technologies, discover novel new products and experiment with different business models. And it can do all those things with the clock speed of a startup.” John B. Riggs, Principal of PwC Innovation & Corporate Venturing.
Notable UK example:
What They Do?
The company develops flexible digital signal processing technologies for use in high-speed wireless applications. This company is revolutionising the next generation WiFi (WiGig) market for wireless broadband and the still to be defined 5G telecoms industry.
This year, Blu Wireless Technology has received a significant investment from ARM and other strategic and private investors. ARM Holdings is a UK based semi-conductor and software design business that generated over £1bn in revenues last year.
“Our investment in Blu Wireless is strategic and includes the tools and resources to enable their technology to be tested on the latest ARM IP. This will help our partners to get to market faster with mmWave-compliant products and help accelerate the rollout of 5G networks.” Noel Hurley, General Manager, Business Segments Group, ARM Holdings.
Anthony Clarke, CEO of LBA, which invested into Blu Wireless Technology through their EIS fund in 2013 commented: “ This significant corporate investment is an important milestone in the company’s evolution and is indicative of the innovative nature of the underlying proprietary technology. As a result of this latest investment, LBA investors have seen a significant unrealised gain on their initial investment in under 3 years.”
In order to continue the fostering of Innovation across the UK, LBA has launched a “Scale-up” Fund to help support exciting companies like Blu Wireless, taking them from the valley of death, to established multinational status.