An international comparison of CVC ecosystems

Europe vs. USA

Serge Reh & Florian Nöll (PwC Deutschland)

Bildnachweis: PwC Deutschland.

With USD 51.7 billion invested in 2023 in Silicon Valley, the region continues to be the heart of innovation and venture capital, playing a pivotal role in fostering relationships and knowledge exchange. Once a year, PwC’s Global Center of Excellence for Corporate Venturing organizes a delegation trip to visit the Bay Area as part of their commitment to staying at the forefront of the venturing ecosystem. During several site visits with key players of the global (corporate) venture capital industry and by participating in the Global Corporate Venturing & Innovation Summit with over 800 venturing leaders, the team gained valuable insights into the global venturing ecosystem – especially compared to the status quo in Europe.

To start, let’s look at the data: corporate venture capital (CVC) has become a significant force in the global innovation landscape, driving start-up growth and fostering technological advancements. While both Europe and the United States have robust CVC ecosystems, the world of venture capital in general has experienced significant challenges in recent times. Venture capital investments have witnessed a notable decline from USD 426.2 billion (2022) to USD 248.4 billion (2023) in annual equity funding (-42%). Moreover, several once-rising shooting stars, such as the scooter start-up Bird (previously valued at USD 2.5 billion) have faced severe setbacks while others already had to file for bankruptcy, such as the co-working company WeWork, or shut down completely, like the healthcare start-up Olive AI and the grocery delivery company Gorillas (previously valued at USD 3 billion). Worldwide, approximately 3,200 private companies funded with venture capital have gone out of business this year, according to the New York Times.

Challenging times for Corporate Venture Capital

Corporate venture capital has also been affected by these trends. There has been a decrease in the number of deals: according to CB Insights, there have been 5,197 corporate-backed deals in 2022, and only 3,545 deals in 2023. In addition, the capital invested dropped notably from USD 102.4 billion in 2022 to USD 55.1 billion in 2023, and fewer venture units have been established (122 versus 65). Furthermore, notable companies in Europe (like SAP.iO or ZX Ventures) and the US equally (such as Verizon Ventures or Avanta Ventures) have scaled back their venturing programmes or shut them down completely.

Investment focus and strategy – AI and sustainability in the spotlight

However, there are also examples of companies doubling down on their CVC efforts – especially in artificial intelligence (AI). In the US, big tech players like Visa, Salesforce or Amazon launched funds in 2023 and 2024 focusing on AI, and approximately half of the venture capital invested in Silicon Valley in 2023 went to AI startups. In Europe, we are seeing a similar dynamic as tech funds such as Sapphire Ventures or T-Mobile shift their investment focus to AI. According to Global Corporate Venturing, corporate investors were in fact involved in some of the largest funding rounds for generative AI start-ups in 2023 worldwide. Moreover, corporate investors were part of nearly a quarter of all rounds (22%) of all generative AI fundraises in 2023. While both regions focus on AI, the ticket sizes in the EU are typically smaller than in the US. There have been a few exceptions like Aleph Alpha (USD 500 million) or Mistral AI (USD 415 million) but with a total of USD 143.7 billion raised in 2023 by AI scale-ups in Silicon Valley, Europe still has a long way to go.

Notable pivot towards investments in sustainable Start-ups

Furthermore, there are still differences in other focus areas: the US CVC scene is heavily influenced by the Silicon Valley tech-centric mindset, with substantial investments in software, biotechnology, fintech and other hightech start-ups. European CVCs, while also investing in technology, may have a broader focus including cleantech, renewable energy, and industries with strong historical roots in Europe, such as automotive and manufacturing. They are focusing on start-ups that can complement their existing business lines or help them achieve long-term strategic objectives. In response to growing global concerns around environmental and social issues, there is a notable pivot towards investments in sustainable start-ups in Europe. This trend reflects a broader corporate commitment to environmental, social, and governance (ESG) criteria, making CVC a powerful tool in driving the sustainability agenda. By backing ventures that prioritize ESG principles, corporations can foster innovation that aligns with their sustainability goals, thereby enhancing their brand reputation and stakeholder trust. ‘We know that 35% of emission reductions need to come from technologies that are not yet commercially available. To deploy those energy technologies at scale, they need to make their way from the lab to pilot application and into commercialization. Corporate venturing can play a critical role in accelerating innovations that can help create a sustainable world’, says Kendra Rauschenberger, General Partner at Siemens Energy Ventures. ‘The scale-up support corporates can provide can go way beyond “just capital” and can include committing resources from the business that help the start-up accelerate and de-risk their business across sales, technology development, and engineering.’

Collaboration and ecosystem building on the rise

Collaboration and ecosystem building are central to both American and European venturing strategies, but they manifest differently. In the US, CVCs frequently collaborate with traditional venture capital firms, leveraging their expertise and networks to identify promising start-ups. This partnership model helps mitigate risks and provides start-ups with a broader support system. The US ecosystem is highly interconnected, with frequent cross-investments and a dynamic flow of information and resources among investors, start-ups, and other stakeholders. In the European venturing world, while it is also collaborative, there is a stronger emphasis on building ecosystems that foster innovation within specific industries or regions. Corporate investors often partner with universities, research institutions, and government bodies to create innovation hubs and clusters – examples would be UnternehmerTUM or the Founders Foundation. These ecosystems are designed to stimulate regional economic growth and technological advancement.

Unleashing the power of the full venturing toolbox

This also fits the observation that CVCs are increasingly starting to use the full innovation toolkit: 40% of the annual GCV Keystone survey respondents in the US said that their company also had venture-clienting operations to collaborate with start-ups and access external innovation quickly. 37% of respondents also had a venture-building unit to create new start-up companies. In Germany, these numbers are even slightly higher: 43% have dedicated venture-clienting teams, and 48% have separate venture-building programmes. This also aligns with the fact that CVCs are focusing increasingly on value creation. ‘Currently, there is a shift in the perception of valuable skill sets for corporate investors. During the peak of the 2021 investment boom, the emphasis was primarily on the ability to generate a high volume of deals. Success was measured by the speed of investment decision-making and the quantity of prominent deals secured, without much consideration for the strategic rationale behind those investments’, says Maija Palmer, Editor at GCV. ‘Today, CVC investors might have the advantage over venture capitalists when it comes to the infrastructure they bring: with a deep bench of internal R&D experts, manufacturing experience and logistics networks, corporate investors can arguably offer start-ups a more effective “platform” experience than venture capitalists.’

Corporate Venturing: A necessity, not a luxury

In the past, having a venturing unit was sometimes perceived as nice to have or a luxury – this sentiment is changing now in Europe and the US equally. A strong corporate-venturing function is increasingly becoming a key asset for corporates – similar to human resources, operations, or marketing – to stay relevant, competitive, and innovative in today’s fast-paced world. It allows companies to explore new ideas, access external expertise, expand into new markets, attract top talent, mitigate risks, and gain a competitive advantage. Venturing units worldwide should see the current macroeconomic challenges as a chance to recalibrate and come back even stronger.

About the authors:

Florian Nöll is Partner at PwC Germany and head of PwC’s Global Center of Excellence for Corporate Venturing. In addition, he is EMEA Startups, Scaleups & Venturing Leader with long-term experience in connecting start-ups, corporates, and investors.

Serge Reh is Senior Manager at PwC Germany and leads the Corporate Venture Capital unit in PwC’s innovation ecosystem. In addition, he is part of PwC’s Global Center of Excellence for Corporate Venturing.

Full special issue „Locations, Regions & Technologies 2024here.