Over the past few years, the majority of investment in US startups has come from corporate funding rounds.
This was the general conclusion from Crunchbase data dive into U.S. rounds backed solely by a corporate investor. Such rounds accounted for 12% of total funding in 2023—the highest point in our study and potentially a record share. The strong showing was largely attributable to one round— MicrosoftThe company’s $10 billion investment OpenAI.
So far, 2024 ranks second in terms of the highest share of financing from corporate rounds, with 7.4% of the total. This is mainly attributable to AlphabetAn investment of $5 billion in PendulumThe company producing autonomous vehicles has spun off from Googlelaboratories.
Meanwhile, over the past six years, the share of financing coming from corporate rounds has reached a low of 1.5% of total investments and has hovered around 5% on average, as shown in the chart below.
Corporate rounds show startup investments are becoming more strategic
While there is no single, universal motive for those leading corporate funding rounds, in most cases, corporations back startups and privately held businesses for strategic, not only financial, reasons.
Microsoft, for example, is less concerned about how much money and returns OpenAI will bring in for investors. It’s more focused on how its technology and partnerships will help Microsoft outpace the competition in AI adoption.
DisneyThe company’s investment of $1.5 billion Epic games this spring, there have been plans to include the entertainment and theme park giant’s content into its gaming platform. And billions General Motors invested in its autonomous driving subsidiary, Cruiseobviously intended to assist GM keep up with technology.
Given the strategic rationale behind the deal, it’s not surprising that corporate rounds are performing well even in the face of a muted exit environment. Corporate investors can see growth in their brand even without a major exit on the horizon.