Almost every large company wants to be innovative (or at least be seen to be innovative). This is easier when they themselves are developing innovative products, technology and services, but much harder when that’s not possible – or not the priority.
In the past, larger entities would, at best, keep a watchful eye on younger startups. At worst, actively ignore them. In recent years, however, we are seeing corporates not only pay closer attention to ambitious young companies, but create initiatives to actively partner with and nurture them.
Projects that combine the weight, brand and assets of a large company with the agility and creativity of startups are becoming increasingly common.
Whether grants, debt or equity funding, strategic investment in promising young companies is a well-trodden path for leading corporates. In some cases this can be simply a sound investment in a startup that may bring significant returns, in other cases it can be a pipeline to acquiring innovative IP or assets, a popular “challenger” brand, top young talent, or all of the above.
Corporate venturing (either through an arms-length fund or directly off their balance sheet) provides a key stream of investment to high-growth companies: The Deal provides further detail on how this compares with other funding types. A related note: startups themselves are often turning to corporate venturing – even when their own future (and business health) is far from clear, like Deliveroo.
Some examples of venturing into UK startups we’ve seen recently:
Flexenable – who develop flexible displays, sensors and other tech, received significant funding from Intel Capital, the venturing and M&A division of the corporate tech giant.
GV, Google’s venturing arm, participated in a $60m round with Secret Escapes – who operate a membership-only discount holiday site.
Blippar – who work on augmented reality products – raised £110m with significant investment from Qualcomm Ventures, the VC arm of the multi-national mobile chip maker, with the most recent round taking place in September this year.
We’ve tracked £2.4bn of this corporate investment in the last seven years* (more on this in The Deal), and goes to show that larger companies uncovering the potential of their smaller counterparts is a key stream of investment for the UK’s growing companies.
Corporates often look to encourage innovation with a different kind of investment: setting up or sponsoring an accelerator programme – often focussed at seed-stage or even pre-seed companies and entrepreneurs. These programmes function as a way to promote the corporate brand (cynics would say this remains the main reason for such activity), and encourage innovation and progression through helping young startups succeed.
Through our accelerator data we can see the makeup of programmes designed to prepare businesses for rapid growth. Of 180+ accelerator programmes we’ve identified, 26 are sponsored, or operated by corporates. In many cases these offer specific perks relevant to the company, for example the JLab accelerator (operated by John Lewis & Partners) offers perks such as access to the John Lewis and Waitrose customer base, their data and internal expertise. These programmes may be created by an internal innovation team at the corporate, or in partnership with an innovation specialist, such as LMarks.
We’re releasing a more detailed look at the UK accelerator landscape in the next few weeks, including an analysis of the top programmes, their alumni and the funding landscape associated with it. To get it first, along with any of our other research, just sign up to our newsletter.
And as with any of our blogs and other research, the best way to see the companies and their funders is through a Beauhurst subscription. Get a free tour at the link below, or find out more here.