If corporate venture capital has one thing on traditional venture capital, it is social impact investing. There is a palpable movement emerging in CVC to include more investment in diverse teams and socially relevant projects but will these bets really pay off? Overall, CVC is a growing source of startup funding. According to a study by CB Insights, “75 of the Fortune 100s are active in CVC, and 41 have a dedicated team.” In 2017, the most active CVC’s were Google Ventures, Qualcomm, Salesforce Ventures and Intel Capital according to the same study.
It is important to note that there are some key differences between CVC and traditional VC. For instance, corporate venture capital arms often invest in new companies for strategic reasons rather than simply for quicker returns or higher IRR. They are often looking to (pardon the pun) diversify their own approaches to emerging technologies, capturing new audiences and corporate social responsibility. By working with and investing in newer, more agile startups to research and implement new strategies, they can often save themselves enormous amounts of time, capital and pain to get to bigger wins faster.
Intel’s Diversity Fund
Intel Capital is a +$1B fund which has made over 1,000 investments over the last 26 years across the enterprise software, mobile, and manufacturing industries. It’s top co-investors include traditional VC firms New Enterprise Associates (NEA) and Sequoia Capital. The number of diversity investments at Intel Capital has increased 22% in 2017 and all told, Intel has invested $70 million in diverse startups. The legacy tech giant launched a dedicated Diversity Fund in 2015 with a $125M commitment to find diverse teams. Wendell Brooks, senior vice president at Intel Capital, said recently that it had already met its 2020 goal for diversity.
The diversity of the founding team plays an important factor in Intel Capital’s investment decisions as each investor looks for diversity no matter the vertical. The logic being that a startup with a diverse founding team is able to pull from a range of different backgrounds, experiences and skill sets. The fund’s definition of diversity has expanded over the years. Managing Director Christine Herron explained, “We want to pay attention to not only women and underrepresented minorities. We are actively looking for people with disabilities, members of the LGBTQ community and those in military service.”
It stands to reason that Intel’s overall hiring practices have set them apart even from other industry heavyweights like Facebook and Google. Paying special attention to include professionals from all backgrounds and walks of life certainly has its benefits. Building a reputation on the ability to identify and operate against the need for increased diversity is extremely valuable when it comes to acquiring and retaining diverse talent. In the long run, this could be the biggest benefit of all as more and more women and people of color earn advanced degrees, start companies and ultimately add enormous amounts of value. According to 2015 McKinsey study, “$28 trillion, or 26 percent, could be added to global annual GDP by 2025” by diversifying labor markets.
AOL and Comcast have also recently launched vehicles focused on diversity. Last September, Salesforce Ventures introduced a $50 million Impact Fund looking to “invest in companies that enable equal access to education, develop tools to promote equal opportunity and economic empowerment for women and underrepresented groups.” But what does this all mean?
It means that corporate venture teams see the value in diverse teams and diverse perspectives and believe that the payoff will be huge. They are doubling down on diversity not just in their communications or their advertising. They are putting significant money where their mouth is. And as current venture trends show, the amount of invested capital dedicated to this emerging deal stream is not decreasing any time soon. With competition from traditional VC to capture both ideas and spending power of the multicultural millennial and generation Z consumer, it looks like it’s a wonderful time to be an entrepreneur from a “non-traditional” background!
- Forbes – “How to Attract CVC”
- Forbes – “Who is the Emerging Force Behind CVC? Women”
- CB Insights – Venture Exits
- CB Insights – CVC Leaders
- Fenwick.com – “Improving Gender Diversity in CVC”
- Corporate Venture Capital and Impact Investing
- Another look at whether female founders get better results
- Everything You Need to Know About Corporate Venture Capital in 2017
- Intel Capital Expands Diversity Fund
Marcia Mitchell is is currently pursuing a master’s degree from Rensselaer Polytechnic Institute in Technology Commercialization & Entrepreneurship. She graduated from Tufts University with a bachelor’s in economics. She is currently working on the IBM – Cognitive and Immersive Systems Lab (CISL) team at RPI and will be hosting a workshop in the spring to address the needs of tech entrepreneurs; specifically women of color and diverse teams. Her goal is to create a destination for women like herself; talented visionaries from diverse backgrounds – and provide them with the tools, connections, and opportunities they need to succeed.