To start, let鈥檚 take you through the new class of corporate venture capitalists, folks against term sheets, and a firm that offers VC-as-a service.

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The New Corporate Venture Capitalists

Corporate venture capital (CVC) funds are everywhere. The category is loosely defined as corporations starting venture capital arms to work with smaller startups.

Within CVC, there鈥檚 a subset of companies that use a third-party operating group to do their investing. The funds don鈥檛 function under their corporate parent鈥檚 branding. Instead, they make their own, separately branded fund. Take for example, a firm that was backed by a commitment of $1.2 billion. This is a thread different than say, Intel starting Intel Ventures and investing across startups under that branding.

Another recent example of this happening is Cisco starting Decibel, a VC firm that is an independent entity focusing on enterprise innovations.

鈥�Decibel will execute its own investment strategy, fund operations, and portfolio management, all while still having unique access as a highly collaborative and aligned partner to Cisco,鈥� the company said in a .

For independent venture funds spun out of corporations, check out , and .

The issue with traditional CVC is that they lack the longevity of a traditionally built out venture capital firm, according to , the CEO and managing partner of Next47.

He added: 鈥淚t鈥檚 the cycle.鈥�

This cycle, understandably, could leave the startups that work with a CVC fund in an unfavorable limbo. So much so that at least recommends doing quite the opposite: it brands itself as helping founders avoid traditional investment, and go the bootstrapping route. That brings us to our next topic: the group of investors who are convincing startups they are more than profit hungry, by never taking equity.

The Anti-Termsheet Club

, a new kind of venture capital-ish firm from and , doesn鈥檛 have any equity in the over 700 companies it works with. But it put investments in each of them.

How does that work?

Flexing its the firm鈥檚 strategy uses an algorithm to sift through a startup鈥檚 data and see if its a fit. The entire process was created to be shorter than the average investment timeline. The fund鈥檚 definition of the ideal investment? An e-commerce company that has positive ad spend and positive unit economics.

As companies are under demand to raise more venture capital money before going public, Romanow tells me Clearbanc wants to help founders keep more ownership of their company amid the trend.

Romanow cited how, for example, when went public Bill Gates owned of the company. For comparison, when Lyft went public, the founders only owned around of the company.

This data-only strategy has helped Clearbanc break patterns with investing in people who look and sound like the status quo. Romanow says they鈥檝e funded 8 times more women than the average VC. Clearbanc has in 2019.

There are, of course, some aspects that will never go away from traditional investing. She says that while their deal flow is heavily driven by numbers, associates at Clearbanc have the ability to singlehandedly veto a deal if the founder and startups don鈥檛 match up culture or personality wise.

“There鈥檚 always got to be due diligence,鈥� she said.

But what happens when you outsource that due diligence?

VC-As-A-Service

, a firm which we wrote about last month, invests in startups on behalf of corporations through its 鈥淰C-as-a-service鈥� model. It manages over $600 million in assets across all of the large corporations it works with, and has done over 150 investments.

Corporate venture capital鈥檚 main issue is that corporations don鈥檛 have the motivation to help the startups they invest in, grow to the next step, says , the founder and CEO of Pegasus Tech Ventures. With a third party firm like Pegasus, he claims, a fund can help a startup grow beyond just one round. He claims that Pegasus has made multiple follow-on investments in 80 percent of their portfolio companies.

This idea of an ecosystem, where one sides feeds another, didn鈥檛 work well for at least one venture firm: . The company notoriously to participate in every stage of a portfolio鈥檚 life company, from startup to unicorn trying to go public.

Additionally Uzzaman says that Pegasus has the network of traditional VCs, unlike CVCs.

鈥淲e do not have any restriction from introducing the startup to other corporations and funds,鈥� he said during a phone call. So they do. Once, a startup was even funded by three separate corporate funds underneath the Pegasus umbrella.

In the event of economic downturn, Uzzaman explained that half of their investments are outside the United States. They currently have a presence in 17 countries.

Big Picture

Regardless of all of this innovation and flashy changes, venture capital is a long term business. Returns take time, even up to 15 years, some say. So these new versions are, just like the startups they鈥檙e investing in, bets. This is just a part of the evolution, and you can be sure we鈥檒l be tracking the success as and when the first returns roll in.

Illustration:

After coming in May, the fund has seen its fastest pace of investment this year since it was formed five years ago.

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The word 鈥渟tealth鈥� may be confusing if we鈥檙e talking about an investment arm that launched several years ago. So let me explain. Previously, the fund operated under the radar as two separate entities: Dell Ventures and EMC Ventures. In 2016, the two merged and was born.

This year, it went public with its investing. Here is what the firm has been up to.

Dell Goes Shopping

In the first half of its fiscal year (from February to September), the venture arm of Round Rock, Texas-based Dell Technologies closed 27 investments.

, president of Palo Alto-based Dell Technologies Capital, told 附近上门 News the fund has made about 80 investments over the last five to six years. Those investments have seen 33 exits, including鈥檚 April acquisition of cloud monitoring company and August buy of cloud services startup.

鈥淎 lot of people ask if the merger between Dell & EMC affected our deal flow,鈥� he said. 鈥淚t has, by picking up the pace. We鈥檙e actually running at a record pace.鈥�

To Darling, the beauty of running a corporate venture arm is that he gets to combine the 鈥渂est of a private venture firm with the best of a corporate investor.鈥�

Partners were hired out of firms like and.

鈥淚f you couple that experience with the go-to-market capability a company of Dell鈥檚 size can bring to a startup, that鈥檚 pretty powerful,鈥� Darling said. 鈥淪ince we don鈥檛 have to worry about LPs likes and dislikes, we have a lot of flexibility.鈥�

Not surprisingly, Dell Technologies Capital is focused on investing areas that are strategically aligned with its parent company鈥檚 business such as storage, networking, software infrastructure, and security. It has also made a dozen or so investments in the artificial intelligence space and finalized deals with IoT startups. And those deals are often made in the early stage of a startup.

According to the firm, ninety percent of Dell Technologies鈥� investments are in series A or B rounds and range from $1 million to $10 million (although they have invested both more and less depending on the deal). Investments total about $100 million a year. Darling estimates the fund looks at 500 to 700 companies a year; however, it only ends up investing in about 30 to 40. It tends to invest in companies that are led by entrepreneurs it鈥檚 backed before or those that are referred by said entrepreneurs.

鈥淲hen companies are vetted by people who are knowledgeable, the hit rate is a lot higher,鈥� Darling said.

Venture Perspective

Austin-area venture capitalists largely welcome the ramping up of Dell Technologies Capital.

, co-founder & managing director at, an Austin-based investment firm, believes Dell is in a unique position.

鈥淲e think Austin needs more capital 鈥� not less 鈥� to support the city鈥檚 ever-expanding technology and entrepreneurial ecosystem,鈥� he told 附近上门 News. 鈥淪o we think this is a great addition to the Austin venture capital scene and see it as complimentary to what firms like Next Coast and others are trying to do.鈥�

, principal of, views Dell Technologies Capital as more of a partner than competition.

“The Dell and EMC venture groups have been very active over the past several years,鈥� he said. 鈥淲e are excited to see them formalize and announce the activity. Access to capital is always a good thing for entrepreneurs and for the startup community.鈥�

, general partner at Austin-based, also doesn鈥檛 view Dell鈥檚 venture arm as competition.

鈥淒TC invests across a broader set of stages and geographies, while targeting categories where they can best leverage their strategic insight and domain experience,鈥� he said. 鈥淭he skills and access that the DTC brings is quite unique and complimentary to what we offer and I expect there is a much greater chance we will partner on local investment opportunities than compete.鈥�

In particular, Flager believes Dell can not only provide entrepreneurs with additional access to capital, it can also help provide 鈥渋nsightful guidance and market access.鈥�

BlueData

, co-founder and CEO of Santa Clara-based, is an entrepreneur that has been a recipient of the Dell Technologies venture arm.

In 2015, his company raised $20 million in a series C round that included participation from and Dell Technologies Capital. BlueData describes itself as the VMware for big data. The startup provides software to large enterprises to allow them to build big data and run machine learning and AI applications.

Sreekanti said, at the time, BlueData had the choice of accepting money from many other VC funds as well corporate strategic investors. But it went with Dell Technologies Capital because of the strategic guidance that could be gained.

鈥淪cott [Darling] and his team have been very insightful. I meet with them very often and discuss the business and questions I have on my mind,鈥� he said. 鈥淭hey are more than just investors.鈥�

If Dell keeps its investment pace high, it could make a big mark in Texas. After all, the state鈥檚 venture scene could stand to get a boost. But what remains to be seen is how long Dell will remain an active investor, especially if the market turns.

For all parties involved, let鈥檚 hope that the good times continue to roll.

滨濒濒耻蝉迟谤补迟颈辞苍:听

It鈥檚 neither soft nor, technically, a bank. It鈥檚 a sprawling Japanese mobile carrier, Internet service provider, and holding company for other businesses ranging from and to . And its investment arm has bankrolled some of the world鈥檚 largest and most successful upstart technology companies, including many with serious name recognition here in the US.

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Like many听large corporations, SoftBank invests its cash across a broad portfolio of asset classes. It also invests some of its substantial capital reserves in earlier-stage technology companies. So where does that cash go, and how is it doled out to startups across the globe?

Softbank Is Not Your Typical CVC Setup

In most cases, corporate venture capital funds (CVCs) are named after their corporate parents. True to the parental metaphor, most of these CVCs receive an ongoing allowance from their corporate sponsors, with no outside money joining the capital pool. Accordingly, it鈥檚 often thought that CVCs are beholden only to the corporation and its strategic initiatives.

This is not necessarily the case with SoftBank鈥檚 investment arm. Although SoftBank does invest its own money in startups, and it has been doing so since 1995 under the aegis of SoftBank Capital, a new fund raised by the company鈥檚 founder and CEO, , blurs the traditional CVC model.

According to , Softbank鈥檚 new fund, called the 鈥淰ision Fund,鈥� has raised quite a bit of money from partners, including:

• $45 billion from Saudi Arabia鈥檚 Public Investment Fund.
• $15 billion from Abu Dhabi鈥檚 Mubadala Investment Company.
• .
• .
• $3 billion from Qualcomm, Foxconn, and Oracle founder Larry Ellison鈥檚 family office.
• $28 billion of SoftBank鈥檚 own capital.

that鈥檚 some $93 billion in total. That leaves $7 billion to go to meet a publicly-stated by November 2017, six months after the initial close. 附近上门 News has learned that the fund is intended to be deployed over five years, with anywhere between seven and nine years to mature before distributing assets back to investors.

This mixing of assets from multiple partners 鈥� both strategic and not 鈥� combined with , and a decision-making framework that makes Masayoshi Son the final arbiter of deals, to say nothing of the sheer scale of the fund, is unusual.

From an outside perspective, it seems like Son has made a kind of Faustian bargain. SoftBank has partnered with some of the world鈥檚 most influential investors in the interest of furthering his 300-year plan to build the largest company on the planet. In doing so, SoftBank runs the very real risk of overwhelming markets for late-stage venture capital, private equity, and post-IPO equity deals, which already have a lot of cash chasing relatively few opportunities.

In the following sections, we鈥檒l compare SoftBank鈥檚 investing style to other CVC groups, chart the growth of its venture capital and private equity investments over time, and discuss some of the challenges SoftBank鈥檚 Vision Fund may face over its twelve-year cycle.

Even With A Unique CVC Structure, Softbank Doesn鈥檛 Break The Mold

As mentioned earlier, SoftBank began its corporate venture capital practice 鈥� SoftBank Capital 鈥� in 1995. It quickly found success with early investments in Yahoo, Alibaba, and Huffington Post, among other notable deals.

For a twenty-year run between 1995 and 2015, when SoftBank鈥檚 then newly-appointed president Nikesh Arora made the decison听SoftBank Capital was one of the top CVC shops around.

Even over the last five years, including the two years where SoftBank Capital was on its way out, the company鈥檚 early-stage investing style didn鈥檛 meaningfully deviate from other CVCs at leading technology companies. Based on 附近上门 data for 1,200 deals made by SoftBank and four of the other most active corporate venture groups backed by big tech conglomerates, we can see that SoftBank ranks among the most active CVCs.

In terms of the rounds that have been publicly surfaced, we can see that SoftBank may not have been the most active CVC. Regardless, it鈥檚 in the top two percent of corporate investors by VC, private equity, venture debt, and post-IPO financing activity overall.

In Early Stage, SoftBank Was About Average

Although SoftBank has lately been swimming in deeper capital pools, its early-stage investing practice hasn鈥檛 been all that different from other leaders of the CVC pack. Here鈥檚 a chart which averages out 799 Seed, Series A, Series B, and Series C deals led or participated in by these top five corporate venture investors between January 2012 and August 2, 2017.

On average, the size of SoftBank鈥檚 early stage venture capital deals were more or less in line with the company鈥檚 CVC peers, at least in terms of straight averages.

So, at least for SoftBank鈥檚 early-stage investing practice, the firm really was just another garden variety CVC. However, with the decline of SoftBank Capital and the rise of the new Vision Fund, early-stage investments would be 鈥渕ore of the exception than the rule鈥� Arora told announcing the decision.

SoftBank鈥檚 Investment Pivot

The Vision Fund is a significant departure from SoftBank鈥檚 previous investing style, even when including other CVCs. Although the new $100 billion fund was just in the late Spring of 2017, the decision to wind down early-stage venture capital investing was made in 2015. In the same interview with ReCode, Arora suggested that 鈥渢he way to preserve the long-term sustainability of SoftBank is to be large minority shareholders of many assets.鈥�

And it鈥檚 possible to see, in the intervening years between largely ending its early-stage investing initiatives and announcing the Vision Fund, that SoftBank had been busy establishing a track record of playing in what Arora characterized as 鈥渢he large-check marketplace.鈥� Although it鈥檚 hard to know exactly how much capital SoftBank has invested in individual rounds, we can sum the total amount of capital raised in VC and PE rounds in which SoftBank was either a participant or the lead investor.

Year-to-date in 2017, SoftBank was a lead or participant in over $14 billion worth of venture capital and private equity rounds alone. This does not account for SoftBank鈥檚 in May, any non-PE or VC financings, or other funding events which haven鈥檛 yet been announced. And given that SoftBank seems to be announcing new deals every week or two these days, the chart above is likely to be out of date very soon. (Update: Softbank to prove us right.)

Visualized a different way, we can see how SoftBank has consistently ramped up the size of checks it鈥檚 willing to write. Below is a logarithmically scaled (i.e. by powers of ten) plot of SoftBank鈥檚 VC, PE, and Post-IPO financing events since the beginning of 2012.

To put this in perspective, in just five short years, the average round in which SoftBank invests has grown by approximately two orders of magnitude, from the low seven figures to the mid-to-upper nine figures.

Deploying $100 Billion Is Harder Than It Looks

The challenge, of course, is that SoftBank now has to deploy two pools of capital: the Vision Fund and its own corporate cash. 附近上门 News has learned that Vision Fund will be SoftBank鈥檚 primary investment vehicle, with preferred access to deals over $100 million. SoftBank declined to comment on the record.

At the time of writing, 附近上门 data shows that, globally, there were larger than $250 million. (We chose $250 million because it鈥檚 a round number and also the amount SoftBank invested in .) In US-based companies, there were of that size closed in 2016.

Even if the global venture capital and private equity markets continue to recover from their mid-2016 lows, and there are more of these quarter-billion-plus rounds, it鈥檚 still going to be difficult to invest that capital judiciously. In a good year, $100 billion is about the size of the entire global VC market. To fill out the rest of the Vision Fund, it鈥檚 likely we鈥檙e going to see more deals like the SoftBank completed in July 2016. As it stands, the Vision Fund now holds 25% of ARM, the now $5 billion stake of Nvidia, as well as equity stakes in a few startups financed directly by Vision Fund. It鈥檚 also possible that previously made by SoftBank could be absorbed into Vision Fund.

Arora told Recode the large-check marketplace is 鈥渓ess crowded,鈥� noting that 鈥渋t鈥檚 a smaller universe of companies we have to understand and support.鈥� What he didn鈥檛 say, though, was that a constrained universe of big deals is a kind of double-edged sword. This being said, SoftBank shows no indication it鈥檚 going to be falling on it anytime soon.

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