Strategic corporate investments and why start-ups need them

Author

LBA

14 March 2017

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.

The focus on innovation in the UK

1. Public initiatives: Since 2007, Innovate UK has invested nearly £2bn in innovation, and Chancellor Phillip Hammond is to allocate more than £550m to boost innovation and technology within the UK.
2. Private initiatives: Examples include the £1bn Syncona/BACIT Life Science Fund and the £80m Seraphim Space VC Fund.
3. Academic institutions: The UK leads in this space with the Francis Crick / Alan Turing Institute and Russell Group universities. The UK is home to seven of Europe’s top 10 universities.

The importance of CVC backing for start-ups

1. 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.
2. 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 of CVC backing for corporates

As John B. Riggs, Principal of PwC Innovation & Corporate Venturing, puts it:

“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.”

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. Noel Hurley, General Manager, Business Segments Group, ARM Holdings says:

“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.”

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.

For further information please follow this link, and to register for LBA’s next fund information session on the 16th of March 2017 from 12:30, please follow this link.

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