Blockchain startups and traditional enterprises are currently in a conundrum. Many blockchain startups are struggling for investment but often don’t have a network in the corporate venture world. Many corporates potentially would – or should – be investing in blockchain businesses but don’t yet really know enough about distributed ledger technology, and the new trends and business models it is throwing up, to do so wisely.
Many blockchain startups also tend to favour angel investors or VC firms who they see as being more ideologically aligned with their views and specialised within the blockchain space. So why should blockchain startups consider corporate venture capital? Corporate venture capital won’t be right for all blockchain startups but some corporate venture arms do offer a strategic advantage because they have access to proprietary insights from markets and technologies that are simply unavailable to other investors. Corporate venture capital firms can also create synergies between their portfolio companies and their parent companies to help accelerate business, an opportunity unavailable to other venture capital firms.
Likewise, many corporate venture firms may still consider blockchain businesses as too risky or fail to understand how their new business models could impact on their industry in future. Telecomms businesses, to take just one example, might consider investing in a plethora of blockchain startups, not just those more obvious choices that might make existing business processes more efficient, but also those innovating in new ways of monetising and gamifying content online. In some cases, this is already happening. Comcast Ventures, for example, is looking at using blockchain technology to allow users to create a unique digital identity and associate it with IoT devices in the home to control access to those devices. Other examples include Comcast and NBCUniversal looking at how blockchain relates to identity, rewards and loyalty, and security.
Corporate venture capital won’t be suitable for all blockchain startups and, likewise, corporate investors will only want to invest in a particular set of startups that relate to their own priorities and interests. But the opportunity to be exposed to this type of investor will be enormously valuable where these interests match up. Currently very few specialised ‘demo days’ or means of formal exposure exist for blockchain startups wanting an entry point into corporate venture capital.
Yet CB Insights data records that corporate venture capital groups participated in $52.95B of funding across 2,740 deals in 2018 – that is huge potential to tap into for the next generation of distributed ledger technology entrepreneurs, particularly given that corporate venture activity is at an all-time high and that new companies formed include entrants such as Coinbase Ventures and ConsenSys Ventures entering from the cryptocurrency space. Asian startups should take particular note as Asia is now the hotbed for CVC activity but activity in the US is also accelerating especially in digital, mobile and healthcare.
In short, both sides have much to gain from developing stronger relationships between the new generation of blockchain entrepreneurs and corporate investing arms – the blockchain revolution in corporate venture is only just getting started.