The main investment factors CVCs take into account include:
- Deal size: CVCs write much larger checks than financial VCs. Among the 74 US private companies valued at $1B or more, 51% have a corporate venture unit as an investor.
- Investment period: Regular VCs have about 5 years to make investments and 5 years to get a return. CVCs normally are evergreen funds or work for longer periods. It’s a waste of time to try to raise money from funds that are not in the invest phase.
- Exits: CVCs timelines are not as strict with regular VCs. But do watch out for merger and acquisition exit clauses from corporations early on.
- Deals per year: The number of investments varies a lot, for example at Amadeus we usually invest in 1 to 3 ventures per year.
- Preferred investment stage: CVCs normally invest from series A and on and it’s quite common to see them investing in ‘unicorns’. CVCs are also increasingly jumping in at the seed stage.
- Industry and portfolio: CVCs are specialized in verticals, while VCs have a broader scope. It is important to know the current portfolio of start-ups CVCs have, as they will want to have a diversified portfolio will not invest in similar projects.
Further unknown, yet important factors
While the factors above are well known and important, the factors below are not so well studied but they are just as important as the previous ones:
- Reputation: The start-up and the investor are affected by the reputation of the other in positive/negative ways.
- Geography: The majority of investment happen in California, but all investors want to have their investment physically close.
- Personal chemistry: Intangible factors are very important as you will have to share long hours with your investors, normally even more in the case of CVCs.
- Commitment: CVCs will ask for more commitment and time spend.
- Understanding corporate objectives: CVCs will often say no just because the idea isn’t aligned to their needs, not because it isn’t good.
Have a look at the Amadeus Ventures websiteto learn about our portfolio and our investment criteria.