The number of companies joining the asset class went up last year for the first time, and the value of venture deals with corporations rose. The activity is different from the last periods of financial uncertainty when many corporations turned away from investing in startups, which angered traditional venture firms.
The recent shift is a clear indicator that the asset class is increasingly becoming attractive to new venture investors and companies planning to keep disruptive technology abreast. Outsiders like private-equity firms, hedge funds, and companies are also playing a major role in making deals.
As online slots and online games on sites like JackpotCity online casino continued increasing, additionally, the pandemic affected markets like e-commerce by accelerating a huge migration of different services online. That heightened the interest of many companies to strategically back tech companies relevant to their businesses.
Last year, the number of new corporate investors jumped by 43% to reach 744 compared to 2019, as revealed by Global Corporate Venturing data. Meanwhile, the general value of venture deals involving US corporations rose by 15% to hit $67.6 billion in 2020, rising from $58.8 billion recorded in the previous period.
The US value of venture deals featuring corporations fell 30% to $6.9 billion during the 2007-2009 financial crisis. Last year, supply chain logistics and truck leasing company Ryder System Inc unveiled a venture unit with a $50 million fund for backing startups.
The company will target the developing technology of startups in four sectors identified as crucial for innovations. That includes e-commerce, electric and autonomous vehicles, capacity sharing services, and assets.
Ryder’s services rose in demand thanks to the pandemic, serving as a catalyst to ramp up its innovation efforts to match the growing demands. According to Ryder’s executive vice president Karen Jones, companies that want to stick around for long in the industry must consider disruption.
Investors have been recently targeting startups developing software focused on developing autonomous freight trucks and those streamlining logistics. For instance, Ryder started using technology from Turvo Inc to integrate different logistics processes and boost efficiency in their customer’s supply chain in 2019.
Massachusetts Mutual Life Insurance also committed $100 million to their venture division in June, hoping to target startups in the cybersecurity and financial technology sectors. This fund increases the company’s assets under management up to $450 million. This commitment will help the financial services firm launch in 1851 to connect with cutting-edge startups to increase its exposure to the asset class.
Traditionally, technological corporations invested in startups from a dedicated fund. However, some startups were worried about accepting the money for fear of losing their ideas by the companies they were trying to dethrone. That’s why many companies are increasingly seeking to structure their venture arms to resemble traditional firms. As such, many are dedicating capital to funds, aiming to dole out investments in a multi-year period.
In previous years, corporate investors were seen in different Silicon Valley circles, cutting down their expenditure like the 2007-2009 financial recession that affected financial and tech companies hard. However, company’s rose above that stigma in 2020, which ended up as a stellar year for technology companies.