Riding the Wave: The Changing Face of Corporate Venture Capital in 2024

After a volatile 2023, 2024 could be a a tough time for corporate venture capital.

Could be. But it doesn't have to be.

As Chris Cusack , Managing Partner of Venture Investing at Mach49 heard from the market, the pressure of economic tumult in the past year and a half has created new resilience in the CVC community. Creating a healthy focus on efficiency.

Here's Chris' take on the state of corporate venture capital in 2024.

The time to start is now. Enjoy.

By Elke Boogert, Mach49 Managing Editor

Riding the Wave: The Changing Face of Corporate Venture Capital in 2024

By Chris Cusack , Managing Partner, Venture Investing

A few weeks ago, I got the chance to meet with the head of an established corporate venture capital (CVC) in New York. Amidst a wide-ranging conversation touching on strategy, mothership management, and emerging investment opportunities in 2024, I invited him to join an upcoming small dinner we were hosting for CVC leaders. To talk markets and trends.

To say I was surprised would be an understatement, but he continued: “I’m done with those for now. They’ve all turned into complaint-fests. So, until I need to get something off my chest, I’ll focus my time on more productive things.”

I was determined to prove him wrong by making our dinner productive and future-focused, but his point resonated. After all, more than 60% of corporate venture capital funds around today were started after 2015. For all of those CVCs, the last 18 months saw the first sign of market tumult that they'd ever experienced. In prior eras, tough times signalled a race to the exits for most CVCs, and a challenging set of issues to navigate for the remainder.

But as I reflected on his comments while we hosted a group of 20 CVCs a few nights later, I was struck by the optimism and resilience that flowed throughout the conversation. Certainly, we shared lots of challenges borne from the current venture market. But more than ever, the conversations focused on how to do the work more effectively (rather than fighting for survival!). It gave me renewed excitement for the year to come.?

In particular, I heard three key themes that evening that I expect will play a role throughout 2024:

First, CVCs are proving to be much more resilient — and opportunistic — in the face of economic uncertainty. Unlike in past cycles, where CVCs often retreated from the venture market during downturns, we're now seeing cautious opportunism. Although CVC dollars flowed more slowly last year, they followed the overall venture capital market. And instead of fighting for their CVC unit’s life (which was much more common in past cycles) I’m seeing corporations using their strong financial positions to spot and seize opportunistic, investor-friendly deals that have popped up due to the overall retreat in the venture capital market.

One CVC head told me that she and her team had quietly made 12 investments in 2023 and plan for more this year. Their focus was on undervalued ventures to which their parent company, a major data business, could add tremendous differentiating value via partnership. Given their unique goals and ability to impact each business, this corporate fund was able to seize the opportunity to build a much broader portfolio than they could have during the higher valuation period of 2020-22.

Second, an emphasis on efficiency and a broader portfolio approach to innovation.

Rather than cutting CVC activities altogether, we’re seeing more companies seek to better integrate their CVC teams with other externally-facing units, particularly corporate development, partnerships, and open innovation. The rationale for this transition is clear: it’s time to uplevel from building an optimal venture capital portfolio or set of partnerships in isolation; the goal is now to approach key business and technology areas with a holistic and efficient portfolio of bets spanning acquisition, partnership, investment, and internal building.?

Done right, this strategic refinement makes it easier for CVCs to move more quickly when they identify a prime opportunity, because the heavy lifting of internal coordination is already complete.

For many years, CVCs have looked to traditional venture capital for guidance on best practice in dealmaking, operations, and structure. Today, the talent level at CVCs is higher than ever — largely driven by improvements in compensation and professionalization across CVC operations. The traditional venture capital model? That’s under pressure by the rise of generative AI and its implications on how businesses will be built in the future.

More often than not, we’re seeing high-performing CVCs take key input from the traditional venture capital market to form a best practice baseline for operations (e.g., decision-making speed, standard terms, due diligence processes), but then look to other investors and asset classes (e.g., corporate development, private equity) to get creative on deal structuring and mutual value creation.

There may always be waves of new CVC entrants and shutdowns through market cycles, but the emergence of new professionalism, a focus on unified innovation operations, and new corporate-specific venturing best practices are driving us forward more effectively than ever before.?

Here’s to a new year of driving impact through corporate venturing — and hopefully to getting my friend back into a more refreshing conversation around the future of corporate venture capital.

As Managing Partner of Mach49’s Venture Investing practice, CHRIS CUSACK specializes in helping corporations, foundations, and governments drive new growth. He advises leading global public and private sector entities on designing and executing new strategies for venture capital, corporate development, and strategic partnerships.

Chris’ journey into the world of venture capital began in startups focused on big societal issues like climate change, healthcare, financial services, and education. He quickly realized that in those highly regulated industries, the typical startup motto of “move fast and break things” didn’t truly apply. Instead, he found that partnerships between startups and corporations were not just helpful, but essential for success. The trick was helping corporations better understand how to work with startups (and vice versa), so they didn’t smother startups in a well-meaning “death hug.” This realization set Chris on a mission to unlock more effective, larger-scale corporate investment strategies to propel the next wave of world-changing ideas.?

Prior to joining Mach49, Chris was a Partner at Silicon Foundry — a boutique innovation advisory firm, where he sharpened his knack for bridging the corporate-startup divide. While there, he led advisory relationships with numerous global businesses (including BHP, Delta Air Lines, Deutsche Telekom, UPS, and Whirlpool) to elevate their practices surrounding VC fund creation and operations, partnership strategies, and digital acquisition.

Outside the office Chris loves to explore the great outdoors. Along with his wife and their golden retriever Tate (lovingly known as Potato), Chris can often be found exploring the mountains around Seattle, WA, playing golf, or becoming a homemade brewmaster when the weather turns cold. Chris holds a BS in economics and a BA in public policy from Duke University.