Corporate VC investments growing rapidly

Cisco, IBM, Intel, HP, Microsoft driving key investments

In the first half of 2007, corporate venture-capital groups -- those that are part of a larger corporation, not a private firm -- invested in start-up companies at levels rivaling those reached in 2001.

Corporate venture capitalists poured US$1.3 billion into 390 deals during the first half of the year, according to the MoneyTree Report, which was compiled by PricewaterhouseCoopers and the National Venture Capital Association (NVCA) based on data from Thomson Financial. These venture capitalists participated in 21 percent of the deals made during the first half of the year, the report says, up from 20 percent during the same time period last year.

Investments by corporate venture capitalists have reached "the highest levels post-bubble," according to Mark Heesen, president of the NVCA, in a written statement.

Many say frenzied investment activity by industry giants -- including Cisco, IBM, Intel, HP and Microsoft -- played a role in creating the Internet bubble, as big corporations looked to cash in on the IPO craze, as well as to get their hands on the latest technology being developed in young entrepreneurs' garages and basements. Corporate venture capitalists fund start-ups as an investment, but also because investors taking a financial stake in a company often are granted access to new technology and innovation, says Darrell Pinto, director of global private equity at Thomson Financial.

Corporate venture capitalists are digging deeper into their pockets this year because their parent companies' earnings are experiencing "positive momentum," Pinto says.

The majority of funding by these investors in 2007 is going to later-stage companies, as was the case in 2006.

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Cara Garretson

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