A deep dive into the dynamics of the

corporate venture capital (CVC) ecosystem

October 2023

Additional data and analysis provided by

Corporate Venture Capital Funds
Are All-Weather Investors
In 2023, CVCs find themselves at a crossroads. As venture managing their corporate parents in 2023 than in 2022 (page
capital markets soften, strategic value could make or break 20) which means less time spent investing. Funds with stronger
a fund. A majority of CVCs face their first pullback — 79% of support make on average seven more investments per year
CVCs surveyed were founded post 2014 — having grown up than funds with weaker support (page 25). Second, dormancy:
during an era of expansion in the innovation economy. The The pullback in active CVC investors since 2022 is apparent Patrick Eggen
slowdown poses challenges to investors as exit markets are on (page12). We see a 53% drop in active CVC funds year-over- General Partner
ice, limiting liquidity. A full 80% of CVCs are anticipating down year (YoY).3 This pullback isn’t necessarily a bad thing, CVC Counterpart Ventures
or flat rounds as valuation overhang persists among VC- funds, unlike traditional venture capital (VC) funds, can have patrick@counterpart.com
backed companies. more flexibility on when they decide to invest. Third,
disconnect: Funds self-reported high NPS scores (page 24), yet
Enter the third annual report on the state of CVC. We surveyed
a tougher market means CVCs face increased scrutiny. If fewer
209 CVCs about how they are responding to the current
investments and fewer exits persist for a long period of time,
market. We also looked at two past years of responses. 1
corporate executives might call into question their CVC
Noteworthy trends include funds picking a side and drifting
strategy.
more strategic or more financial. While the elite group of
bellwether2 funds has become more financial, across the Despite challenges, CVCs serve primarily as a sensor for their
board, funds are leaning more strategic. parent companies. Funds shared they were able to speed up
time to market and decrease R&D spend thanks to strategic
Motivations beyond strictly financial give CVCs an opportunity
bets. We believe CVCs are positioned to maintain their status
to step in and place bets for the long run. Will CVCs be able to
as all-weather investors. Businesses will need to innovate to Mark Gallagher
take advantage of lower valuations and a less crowded market,
remain competitive and will look to their CVC fund for insights Head of Investor
or will they be forced to cut back as corporate parents struggle
and access to the latest technologies from AI, climate tech, Coverage
to see the value of venture investing? Three factors are at play.
robotics and beyond. Silicon Valley Bank
First, dependency risk: Funds are spending more time
mgallagher@svb.com

Notes: 1) 164 CVCs responded in 2022 and 106 responded in 2021. 2) CVC Bellwether: index of 25 CVCs selected due to historical track record, current scale and
investment velocity. 3) Active is defined as having made at least two deals over the period.
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis. STATE OF CVC 2023 22
2023 CVC Survey Key Findings

CVC Market Overview

CVC Fund Structure and Operations

Team Dynamics

CVC Outlook

STATE OF CVC 2023 3

STATE OF CVC 2023 4
1. 2. 3. 4. 5.
VC investment peaked in CVCs are increasingly CVCs are still hampered CVCs aren’t just looking CVC use of carried interest
2021. Now, CVC funds selective, raising the bar by their decision-making for financial returns. varies across fund types
are slowing down. for new investments. process. but has a meaningful
impact on retention.

52% 72% 38% 33% 21%

of funds have slowed of funds state that of CVC funds spend of CVC funds report increase in average tenure
their deal pace over the the bar is higher more than 40% of a mix of financial and for CVC heads for firms
last 12 months, similar for new investments; their time managing non-financial metrics; that offer carry. 56% of
to global VC investment, 45% say it’s their corporate 13% report using only financial funds offer carry
which fell 47% YoY.1 significantly higher. parent, thus limiting non-financial metrics. compared to only 5% of
time spent investing. strategics.

Notes: 1) Based on global VC investment, September 2023 to October 2022 vs. September 2022 to October 2021.
Source: CVC survey results (based on responses from 209 CVC funds), Pitchbook and SVB analysis. STATE OF CVC 2023 5
Survey Participation Rates1 CVC Survey Respondents Makeup
Headquarters of Parent Year CVC Was Founded Ownership of Parent

209
representing 19%
of all active2 global CVCs,
63% 37% 21% 79% 75% 25%
up from 164 last year.
US Rest of world Pre-2015 2015-Present Public Private

accounting for and over Industry of Parent Current AUM Deals Per Year

~$7B 38% 56% 27% 17% 52% 39% 9% 53% 32% 15%
in capital deployed of Global CVC deals
per year. completed per annum. Other industries Technology Finance <$250M $250M-$1B $1B+ 1-5 6-10 11+

Broadly speaking, CVCs can be bucketed into three

fund types, driven largely by their self-defined
Spectrum of CVC Fund Types by Survey Respondents3
Strategic Hybrid Financial
investment objective:
More strategic Staying the same More financial
Strategic: 42% of funds invest for insight or value-
add related to the corporate parent’s goals; 80% of 27% 26%
these funds have evergreen allocations from the
balance sheet. 15% 16%
10%
Hybrid: 32% of funds are a uniquely defined balance 6%
of strategic and financial; 68% have evergreen Strategic Hybrid Financial
balance sheets.
Financial: 26% of funds consider only financial gain;
Becoming more
39% of financial funds are becoming more financially
strategic or more 55% 39% 7% 26% 58% 16% 7% 54% 39%
oriented, a signal that CVC funds can behave more independent?
like traditional VC funds.

Notes: 1) PitchBook as of August 31, 2023. 2) Active is defined as having made at least two deals over the year.
3) Based on survey question. Firms were asked if they are focused on strategic or financial returns. Firms self reported on a 10-point scale.
Source: CVC survey results (based on responses from 209 CVC funds), PitchBook and SVB analysis.
STATE OF CVC 2023 6
25 Funds
The CVC Bellwether sets Index1
Bellwether Funds …
skew financial are active and lead deals

the bar for best practices.

16%

Strategic Hybrid
28% 56%

Financial
12
deals per year
88% 56%
can lead deals write checks in two months
While individual firms are not disclosed, these 25 median or less from first meeting
are becoming more financially motivated
elite CVCs were selected based on three criteria:
24% 48% 28%
embrace VC comp models
More strategic Staying the same More financial

often take LP positions

56% receive carried interest, which aligns
with a traditional VC model

56% 44%
Fund Size Deployment Reputation
Do Do not
$500M+ $100M+ Per In CVC have investment autonomy
AUM Year community set up formal capital reserves for

This cohort represents the North Star for both established and
emerging CVCs and provides a leading indicator of market
follow-on investments

64% 16% 20%

52% of funds finalize investment
decisions without separate executive
investment committee approval
sentiment, investment velocity, progressive compensation structure,
and decision-making autonomy. Do Ad Hoc Do not

Notes: 1) CVC Bellwether: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis. STATE OF CVC 2023 7
Pace of Investment in Last 12 Months YoY Comparison1,2

Slowed Remained consistent Increased

6%
14%
10% Three years of survey data yields a clear trend:
19% 17% CVCs are taking their foot off the gas. Venture
20%
31%
investment in the current macro climate is
35%
28% characterized by lower valuations, fewer exits and
42%
27% investments across the board. CVC activity is no
56% exception with the vast majority of respondents
31% 63% reporting a slower investment pace in 2023. This
31% can be observed across mandates. For example,
50% 77% 77% of bellwether funds increased their pace of
47% investment in 2021 compared to 6% in 2023.

25%
47% 54%

67%
63%
31%
50% 53%
26%
36% 8%
33% 33%

18% 15% 15%

13% 11%

'21 '22 '23 '21 '22 '23 '21 '22 '23 '21 '22 '23

Strategic Hybrid Financial Bellwether

Notes: 1) CVC Bellwether: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
2) Based on survey respondents across the 2021, 2022 and 2023 surveys, funds that have responded all three years.
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis. STATE OF CVC 2023 8
 CVCs anticipate more frequent flat and down rounds, aligned with current trends
witnessed in the innovation economy at large. However, the majority of CVCs signal an
CVC Portfolio Sentiment and Response
intention to support their portfolio with only 27% of CVC anticipate having to “orphan” to Investing Climate
an investment. This continued support points to the strategic value CVCs receive from
their portfolio companies. Thus, they have an incentive to help their portfolio companies
succeed despite financial risks.
This bearish outlook translates to additional scrutiny for new investments. But it could
prove to be a reputation-making era for some CVCs. While strategic value-add might
27%
anticipate having to
53%
of CVC teams
72%
of CVC teams
have been a point of differentiation in a bull market, perhaps its true worth might orphan2 portfolio have had no say the bar for
shine when the chips are down. CVCs may choose to stick with portfolio companies companies that exits in their new investments
when traditional VC investors pull back. are struggling. portfolio over the is higher than
past 12 months. in 2022.

Compared to 2022, is the bar higher for new investments?1

Half
Remains the same Slightly higher Significantly higher of respondents said they made fewer
investments in H1 2023 compared to H1 2022.
Strategic 36% 38% 26%

Hybrid 25% 53% 22% 80%

of CVCs
64%
of CVCs have
55%
say less than 10%
anticipate some had at least one of their portfolio
Financial 22% 48% 30% of their portfolio portfolio has taken a
companies will company take a markdown.
take flat and markdown in
down rounds in the last 12
Bellwether 28% 52% 20% months.
the next 12
months. Only 8%
say many will.

Notes: 1) CVC Bellwether: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
2) When a fund ceases to support a portfolio company and writes it off.
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis. STATE OF CVC 2023 9
Data and analysis provided by

STATE OF CVC 2023 10

 Global VC Deals With CVC Participation1
Capital invested Deal count
Kyle Stanford, CAIA Full year estimate
Lead Research Analyst, Venture Capital,
PitchBook 13.9K
13.K

9.2K
As the venture market slowed dramatically in 2022, CVC showed its staying power, continuing to 8.K 8.2K 8.7K
participate in more than 25% of completed venture financings in the US. However, there has been a 6.7K
6.1K 5.8K
considerable slide in corporate venture investment over the past half year. Globally, just 5,800 deals, 5.3K
roughly, have included participation from a corporate arm, pacing the year for the lowest annual deal 3.6K
2.7K
count since 2020. On an annual basis, CVC participation in venture has fallen to its lowest level

$102B

$396B
$105B

$190B

$152B

$197B

$273B

$111B
$51B

$85B
$27B
since 2015, at just under 24%. It may not be a major decline, but it highlights the added challenges
that corporate must clear in a volatile environment. The venture market has slowed, but CVC has
slowed further. '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23
This has been a distinct change in CVC. Corporate programs have ridden the wave of a growing venture
market by pushing their expanding revenues to work over the prior few years. Globally, more than 2,300 Deals With CVC Participation as
CVCs were active in at least two investments during 2021 and 2022 — a figure 56% higher than the
previous high-water mark of 2020. In general, startup investment has become a much larger piece of Proportion of Global VC Deals1
corporate growth initiatives by providing both data on emerging technologies and potential product Percent of CVCs participating in global VC deals by deal value
partnerships. Financial returns of the VC market have been high over the past decade, which is an Percent of CVCs participating in global VC deals by deal count
additional benefit for even strategically focused CVCs. CVC is no longer an occurrence relegated to the
tech sector; it spans across emerging and legacy industries — an indication that corporates see the 53% 54% 53% 53% 51% 50%
potential disruption from new technologies and fast-growing startups. 47% 47% 48%
41%
36%

26% 26% 23%

22% 22% 23%
20% 20%
18%
14% 15%

'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23

Notes: 1) 2023 data as of August 31, 2023.

Source: PitchBook Data, Inc. STATE OF CVC 2023 11
The more expansive CVC strategy has led to a more nascent group of investors, and 2023 has been a
challenging year for global corporates. Dependency risk for corporate venture programs is especially high
Active Global Corporate Venture Capital
in these types of volatile markets. A corporate strategy change, or the loss of an executive champion, Investors by Region1,2
can be painful reminders for CVC arms about how much they rely on factors outside of their
US Rest of world
performance for continued funding. Newer investment programs may be most at risk here, but they are
surely not the sole targets of strategy changes. Recently, Microsoft’s M12 has restructured its strategy,
refocusing the division under new leadership, while TotalEnergies closed its cleantech CVC fund during the
year, selling off its portfolio despite gas prices keeping cash flow to the business high on a historical basis.
These are just a couple of the CVC programs with new faces since the slowdown began.
Though references to the term “recession” during earnings calls have declined and, in some sectors,
profits have soared, executives walk a fine line between appealing to investors and driving value through 1759 1754
innovation. This often leads to a divergence between the market narrative and the true independence of
corporate venture arms. Funds allocated to startup investment can always be reallocated. There, too,
remains a high level of uncertainty in the market. Interest rate hikes may continue, albeit at a reduced
pace, and inflation has been stubborn in the attempts to return it to target rates. Private markets — and 1118
venture especially — have borne the brunt of investor rotation to less-risky assets. 977 971

Dependency risk may not show up immediately in the form of closed or restructured CVCs; dormancy is 787 825
734
more common. Budgets can be cut, thereby restricting activity levels, and the number of active CVCs in 573
2023 has fallen considerably. Though data is just through the end of August, only 1,100 corporates have 302
remained active this year globally. This isn’t an indictment of the strategy so much as a natural fluctuation 221 608 614
337 377 395
in an evolving market. 174 196 222 255 285 279

'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23

Notes: 1) 2023 data as of August 31, 2023. 2) Active is defined as having made at least two deals over the period.
Source: PitchBook Data, Inc. STATE OF CVC 2023 12
In all, corporate venture capital has developed into an important part of venture market development in
recent years — one that is likely to rebound when the market turns around. Though 2021 levels of activity
Global Exits of CVC-Backed Companies 1,2
are likely not in the cards for either CVCs or traditional venture investors for some time, the additive Capital invested Deal count
strategy of corporate investment has shown that it can impact the growth, or continued incumbency, Full year estimate
of corporations globally. The VC market itself has benefited from the partnership. Companies with CVC
partnerships exit at a higher rate and go out of business less often than those without a CVC on their 1,732
cap table.
The market’s run-up to 2022 provided many opportunities for corporates to add a venture program or to
add fuel to an existing one. While it is natural for the opposite reaction to occur during a market slowdown,
the nascency of many CVCs has likely hastened the pullback of some CVCs — especially with the dire
1,208
narrative that the venture market projected over the past year.
1,073
At the end of the day, returns are what matter, whether those be strategic or financial in nature. Not only 981
have S&P 500 companies that actively invest in startups outperformed the broader market over the 898
812
long-term, but YTD performance has also outpaced the market. From simply an investment ROI, in 730
2021 when exit activity reached its peak in the US, CVCs were present in 43% of the exit transactions 637 662
608
654
which represented 84% of the total exit value generated. There still remains a large portion of potential
466
financial CVC returns locked in as remaining value to be exited. The return of an IPO market or VC-backed
M&A could have an enormous impact on previous CVC investments and drive future investment from CVC.

$91B $137
$1190B
$134B

$127B

$269B

$249B

$433B

$214B
$74B

$74B
$54B
'13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23

Notes: 1) 2023 data as of August 31, 2023.

2) Company exits with CVC investors on the cap table.
Source: PitchBook Data, Inc. STATE OF CVC 2023 13
Studying a cohort of deals that included CVC participation CVC-Backed Startups Funnel1,2
during their seed round2 illuminates the benefits of having a
Advance to next round Acquired/Buyout/IPO Out of business Did not advance/Self-sustaining
CVC on the cap table. Not only did companies move onto
their next investment at a higher rate than companies
Start with 378 companies
without a CVC on the cap table of their seed financing, having raised two rounds of
but they also reached a successful exit more often. funding.
At nearly 40%, the number of companies reaching an exit
Round 1 378
more than doubled the proportion of companies that go out
of business within the cohort. As the focus of non-VC firms
Round 2 253 51 36 38
has remained on later stages, more than 50% of CVC deals
have occurred at the seed and early-stage where strategic
Round 3 176 28 14 35
benefits of access to emerging technologies and markets
38 companies did not raise any
can be had. further funding after round 2 (to
Round 4 114 29 10 23
When a funnel of all companies with a CVC on their cap date).
table are taken into account, the positive outcome Round 5 74 19 6 15 36 of the cohort have gone
percentages increase further. While there is bias in that bankrupt or out of business after
dataset from CVCs entering the cap table in the final VC Round 6 39 14 0 21 their second funding round.
investment, the funnel using seed deals shows an ability
19 companies were acquired or
for CVCs to find successful companies early and benefit Round 7 18 8 1 12 went public after having raised five
both financially from the exits and strategically from rounds of funding.
the partnership.

Outcomes of CVC-Backed and Non-CVC-Backed Startups

CVC-backed Non-CVC-backed

39%
33%
24%
18%

Successful exit Out of business

Notes: 1) 2023 data as of August 31, 2023.

2) Companies that raised a seed round that included a CVC investor between 2008 and 2012 form the initial cohort.
Source: PitchBook Data, Inc. STATE OF CVC 2023 14
STATE OF CVC 2023 15
 Metrics Reported to the Parent Use of Capital Reserves for Follow-
Company1 On Investments 1
Financial metrics Both Strategic metrics No reserves Ad hoc basis Reserves allocated

They aren’t just looking for financial returns. CVCs

have a luxury that traditional VCs do not: Providing 31% of CVCs still
Strategic 48% 27% 25% Strategic 44% 44% 11% don’t have follow-
strategic value often outweighs providing financial on reserves.
return. So long as the CVC isn’t bleeding cash,
many CVCs continue to thrive despite tepid 58% of CVCs say
financial returns. CVCs need to demonstrate that Hybrid 51% 40% 10% Hybrid 23% 42% 35% it has not become
harder to do
they provide value to their parent company. Across
follow-on
surveyed funds, 55% of CVCs report purely investments in
financial metrics, while 33% report a mix of Financial 70% 28% 2% Financial 18% 24% 58% the current
financial and non-financial metrics, and only 13% environment.
report using only non-financial metrics.
Top KPIs CVCs use to measure non-financial Bellwether 75% 21% 4% Bellwether 20% 16% 64%
metrics include incremental revenue lift, R&D
savings, new business unit creation and reduction
of time to market. However, firms spoke candidly
about the challenges of non-financial metrics. “As Share of Funds With at Least 50% of Portfolio Companies That Have
soon as you start quantifying strategic value, the Investments Leading to a Strategic Outcome Commercial Contracts With the Parent1,2
calculations become so complex that determining
a metric requires collaboration/concessions with Median 25th Percentile 75th Percentile
31%
internal teams. No one can trust them.” A way 30%
around this is by taking a holistic look at strategic 80%

value by providing case studies of success. “We 70%

made our first investment in AI in 2014, which gave
60%
our business insight into the market before starting 19%
to develop internal capabilities.” 16%
50%

Counterpart’s CVC community Counter Club has 40%

seen a huge uptick in membership over the last 2-3 30%
years as new CVCs have launched. However, the
average CVC life span is currently around 3-4 20%
years. Considering that startup companies 10%
typically have 7-10 years before an exit, a clear
disconnect exists between CVCs and startups. 0%
Strategic Hybrid Financial Bellwether Strategic Hybrid Financial Bellwether

Notes: 1) CVC Bellwether: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
2) As a percentage of total investments. STATE OF CVC 2023 16
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis.
 Fund Structure by CVC Type1,2
Evergreen balance sheet Single-LP Multi-LP
CVCs are broadly characterized by three fund types
driven by their investment objective: strategic, 14% of firms have considered
hybrid, and financial. The reality is that this Strategic 84% 15% 1% moving funds off balance sheet in the
last 12 months. Top drivers include:
position is both subjective and constantly evolving
with factors such as market conditions, stock
price, executive sponsorship and perhaps most Increased independence
Hybrid 68% 29% 3%
importantly, CVC leadership. from the corporate parent
Much like a “key man risk” is for traditional VCs,
dependency risk is a significant factor for CVCs
Financial 44% 38% 17% Broadening the
and comes in two forms. First, CVC leadership
investment scope
dependency occurs when a CVC leader departs,
exposing the firm to substantial changes or
potential dormancy. Second, corporate executive Compensation
Bellweather 54% 33% 13%
dependency occurs when a change in corporate for the team
executive leadership brings a change in perspective
on the CVC’s mandate. CVCs can be adversely
affected by personnel change but have the good
fortune of being easily resurrected when the
Stage Preference by CVC Type1,2,3 Median AUM and Fund Size
corporate parent deems it fit to do so. Pre-Seed & Seed Early-stage Late-stage Stage agnostic by Stage Preference3
However, this risk is not consistent across all fund Median check size Median AUM
structures. Balance sheet funds (evergreen
Strategic 14% 63% 10% 14% $8M
funds) are more susceptible to changes at $650M
the parent than single or multi-LP funds which
maintain a large degree of independence with
a contractual obligation for funding from Hybrid 5% 79% 5% 12%
the parent.
Since 2021, one factor that remains consistent $3M $3M
across structure and type is an early-stage Financial 80% 11% 9% $275M
preference. Most CVCs are spending less time in
$200M
late-stage deals, while on average 12% of CVCs
$1M
are stage agnostic. Getting in early allows $50M
CVCs to have a front-row seat at the most Bellwether 84% 4% 12%
emerging companies. Pre-seed & seed Early-stage Late-stage & Stage agnostic
growth

Notes:1) CVC Bellwether: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
2) Data labels not adding up to 100% is due to rounding. 3) Early-stage is defined as Series A and B. Late-stage is defined as Series C plus. STATE OF CVC 2023 17
Source: CVC survey results (based on responses from 209 CVC funds), PitchBook and SVB analysis.
 Average Strategic and Financial CVC Fund Types Over Time 2,3
Score by Fund Type1,2,3
Bellwether Non-Bellwether
Strategic
Over the last three years, most CVCs are leaning 33% 32% 42%
more strategic, while bellwether CVCs are 6.7
embracing more financial mandates. In a tougher 6.1
economic climate where financial returns are
5.5
becoming harder to attain, strategic benefits have
taken on greater importance to funds. In 2021, 50% Hybrid CVCs pick
a side
of funds were hybrid. Now funds are leaning 50% 49% 32%
distinctly strategic or financial during a time of 5.0
4.8
pullback, as hybrid CVCs can have competing 4.3
incentive structures.
A major purpose of CVCs, even financially oriented Financial
CVCs, is to act as a sensor to understand emerging 17% 19% 26%
and future trends. CVCs are investing in startups to
2021 2022 2023 2021 2022 2023
tap into trends and build adjacent businesses to
avoid a Kodak or Blockbuster-like moment.
Corporates from around the world are placing Goal of CVC by Fund Type1,2
investors in key startup hubs like the San Francisco
Bay Area to maintain relationships with startups, 1% 1% Other

develop partnerships and establish commercial 5% 9% Source potential M&A target

15% 7%
agreements. 19%
Founders should look to
While some CVC funds are grouped together with CVCs as strategic partners,
31% 35% Augment existing business not as an exit route
corporate development and M&A teams, most are
and or accelerate the
distinctive. One example where it’s grouped 40%
commercialization with
together is Cisco Investments. Given such, Cisco 47% business unit or R&D
launched its independent CVC arm Decibel
Partners in 2019 to pursue more financially
oriented investments.
57% 56% Sensor to understand Even the most financially
44% emerging + future motivated firms serve as
33% trends and new a sensor for the parent
markets company

Strategic Hybrid Financial Bellwether

Notes: 1) “CVC Bellwether”: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
2) Based on survey question. Firms were asked if they are focused on strategic or financial returns. Firms self reported on a 10-point scale. 3) Based on survey
respondents across the 2021, 2022 and 2023 surveys. STATE OF CVC 2023 18
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis.
 Percentage of Funds That Take LP LP Positions by Number of VC
Positions by Fund Type1,2 Deals Made per Year
Corporate LP investments into other fund managers Financial Hybrid Strategic Bellwether Percentage of funds that take LP positions
represent a significant slice of the CVC fund’s Average number of LP positions
activity. Typical reasons why CVCs make an LP 55%
investment are not surprising: to access deal flow, 67%
66% 53%
gain geographic exposure and diversify where the 60%
56% 10.9
CVC team does not already have access. 53%

Some strategic and hybrid CVCs in this year’s survey 45%

41% 56% 55%
have paused making LP investments. A possible 47%
48%
explanation could be a general market pullback, 33% 44% 6.4
which is consistent with the rest of the venture 5.4
capital industry. If this trend continues into next year,
funds may experience knock-on-effects. Generally
speaking, more active funds take more LP
positions. If LP positions decline, we could expect
slowing deal flow and more onus on the team to 2021 2022 2023 2021 2022 2023 2021 2022 2023 2021 2022 2023 1-5 5-10 10+
stay on top of current trends, conduct diligence Financial Hybrid Strategic Bellwether
and maintain a diverse pipeline.
How CVCs Are Altering LP Allocations Top Five Reasons for Taking
Financial CVCs continue to buck the trend with more
financial funds taking LP positions than in prior
Increase Stay the same Reduce Cease Other LP Positions by CVC Fund Type
years. Twenty-three percent of funds have said they Financial Hybrid Strategic
are going to cease LP investing altogether — and over
half of those funds are strategic funds. It will be
interesting to see the results of LP checks written in
the last two years. The returns — good or bad —
could have a material impact on whether they Less popular More popular
decide to keep using this strategy.
18% 51% 3% 23% 4%
Deal flow
Insights/Expertise
54% of
these funds Diversification
are strategic

Geographic exposure

Team resources/Diligence support

Notes: 1) “CVC Bellwether”: index of 25 CVCs selected due to historical track record, current scale and investment velocity. 2) Based on survey
respondents across the 2021, 2022 and 2023 surveys. STATE OF CVC 2023 19
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis.
 Percentage of Funds Spending at Least 40% Level of Business Unit Engagement
of Time Managing Corporate Parent1,2 Required for an Investment1
None Some Significant
65% 4%
Hybrids and strategics are spending
Strategic CVCs are spending significantly more time more time managing corporate
0.12
managing the corporate parent YoY and compared to parent in today’s environment 26%
25%
CVCs with other mandates. This can be a distraction 47%
to investors looking to source new deals. Time spent 0.32
61%
managing the corporate parent can vary from working
on behalf of portfolio companies to establishing
27%
commercial agreements, navigating procurement or 22% 59%
legal departments and various other factors. 17%
71%
12%
Financial and bellwether funds have gone in the other 10%
7% 0.56
direction resulting in more time to source new deals 32%
and deploy capital. Financial and bellwether funds
15%
make up the largest portion of CVCs that have 2022 2023 2022 2023 2022 2023 2022 2023 7%
independence in the form of multi-LP fund structures.
Bellwether Financial Hybrid Strategic Strategic Hybrid Financial Bellwether
Thus their dependency risk on corporate HQ is
significantly lower.
Strategic CVCs also require significant business unit
IC Approval by the Numbers1 Percentage of Funds That Take
engagement to make a new investment. This increased Bellwether Financial Hybrid Strategic >2 Months to Make Investments
engagement also translates to a longer time between
first meeting and check writing for strategic CVCs, Percentage of funds that Percentage of funds with IC meeting frequency2
require IC approval a threshold for IC approval
which during 2021 may have hampered strategic CVC’s
ability to write new checks. $750K: Typical threshold 66%
Quarterly
Ad hoc
Investment committee (IC) approval is another hurdle 94%
44% 55% 17%
that increases investment timelines. Bellwether funds 82%
are generally far more independent (with only 52%
71%
requiring IC approval), while practically all strategics
require IC approval. This can be especially challenging 52%
27% 26% 52%
Monthly 22%
for funds whose IC may only meet on a quarterly basis
(17% of funds that require IC approval). 18%

9%

Weekly
No IC approval IC approval

Notes: 1) “CVC Bellwether”: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
2) Based on survey respondents across the 2022 and 2023 surveys. STATE OF CVC 2023 20
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis.
STATE OF CVC 2023 21
 CVC Teams in Office CVC Team Makeup
Hybrid In-person Remote Average team size Average percent of team that are investors

CVCs are still mostly embracing remote and 50% of CVC heads 64%
hybrid work environments with 71% of fund are based at the
employees dropping into the office 2-3 days per parent companies’ 56% 56%
20% HQ, 25% are in the SF
week or not at all — well above the national
Bay area, and 16% are 48%
average of 41% for hybrid and remote work for all working remotely
work environments in the US. 1 However for CVC
heads, more work in the office with only 16% 69% of funds that
working remotely. CVC heads are also more 51% have an office go in
likely to be located at headquarters to keep a 2-3 days per week
close relationship with the corporate parent.
29%
Given this close relationship, CVC heads have a
long tenure relative to the age of their fund with
27% having been with the fund since inception.
8 11 19 29
Turnover of the CVC head can be disruptive due to
the loss of institutional knowledge gained from Strategic Hybrid Financial Bellweather
Bellwether
experience within the fund and relationships with
the parent company.
CVC Head Tenure by CVC Fund Age Percentage of CVC Investors That
The percentage of female CVC heads remains flat
compared to last year. However, when it comes to
Year CVC was founded: 2015-Current Pre-2015 Identify as Female or Minority
team makeup, representation of female and 40%
minority groups has seen a slight bump with 42%
of CVCs sitting in the 25%-50% range. 35% 27%
75%-100% 7% 17%
of CVC heads of CVC heads identify
When it comes to average team size, the 30% have been with as female
sophistication of bellwether funds requires more the fund since
25% the beginning
people to deploy a significant amount of capital
50%-75% 14%
and lead deals. Across the board, fund personnel 20%
are evenly split between investors and business
development. However, financial CVCs skew 15%
toward having more investors on staff considering 25%-50% 42%
10%
their mandate.
5%
15% have less than
0% 0%-25% 37%
10% diverse
<1 1 2 3-5 6-10 11+

Notes: 1) WFH Research’s Survey of Working Arrangements and Attitudes. STATE OF CVC 2023 22
Source: CVC survey results (based on responses from 209 CVC funds), WFH Research and SVB analysis.
 Percentage of Bellwether1 Funds Percentage of Funds That Offer Carry
That Offer Carry by Fund Type1
Carried interest (carry) is a compensation
mechanism widely used by VC funds. CVCs 56% 56%
however often do not offer carry potentially due
to the lack of understanding, or incentive by the
parent company. 56%
Bellwether funds are changing this paradigm given
their sophistication and understanding of the 50%
compensation structure. An increasing number
24%
are offering carry, with more than half doing so in
2023. Over time, carried interest will become
more commonplace for top-tier financial 40%
funds, given that offering carry is shown to
5%
lead to longer tenure for investors .
Most strategic funds do not use carry. Several
2021 2022 2023 Strategic Hybrid Financial Bellwether
of the surveyed funds cite that carry creates a
misalignment of incentives if investors are
compensated for their portfolio’s financial Average Tenure of Investors Alternatives to Carry Offered 2,3
performance when the fund’s objective is not No carry offered Carry offered
financially oriented. This reluctance is also driven
by a fear that offering carry will cost too much for 73%
the parent company or simply be viewed as unfair. 67%
Of the CVCs surveyed, only 24% receive carry. 21%
While 24% may seem low relative to traditional The increase in average
funds, it still represents a promising data point tenure for CVC heads for
for CVC compensation. Counterpart Ventures firms that offer carry
estimates the percentage of funds that received
33%
carry was sub-10% 10 years ago, and for those that
27%
currently do not, some cited they receive other
forms of compensation to retain top talent and
drive the performance of the fund. Examples Long
include shadow or synthetic carry, 2 bonuses term
bonus
and stock options.
Shadow carry
AverageTenture
Average tenure <5
<5 years
Years Average Tenure
Average tenure >5 years
Years

Notes: 1) “CVC Bellwether”: index of 25 CVCs selected due to historical track record, current scale and investment velocity.
2) Shadow or synthetic carry is a bonus pool created by carried interest dollars that can be distributed among members of a funds
team, not just managing partners. Some models include guaranteeing payments while others do not. 3) RSUs = Restricted Stock Units STATE OF CVC 2023 23
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis.
 Distribution of NPS Scores Average NPS Score by Fund Type
Detractors Passives Promoters

Average number of exits LTM

8.1
NPS score measures the support a CVC has within 29.2%
7.9
their organization. CVCs surveyed generally have a 1.5
2.6
positive outlook on the support from the parent
organization; 77% self-reported an NPS score of 7
20.1% 7.4
or higher on a scale of 10. While this is a high 7.3
average score across all types of CVCs, they skew 16.7%
0.9
highest among bellwether and financial CVCs.
This score makes sense because bellwether and 11.5%
financial firms are more independent from the 9.1%
parent, which conveys a certain level of approval. 6.7%
4.3%
However, CVC should beware of the pitfalls of
1.0% 1.0% 0.5%
marking their own homework! Perhaps CVC
teams are broadly enjoying such levels of
1 2 3 4 5 6 7 8 9 10 Bellwether Financial Hybrid Strategic
advocacy within their organizations, but it
would be prudent to warn of the potential for
“excessive positivity,” especially when coming Average NPS by CVC Age NPS Score by Time to Make an Investment
down from the exuberant highs of venture
Average
activity of 2020 and 2021.
From the data, it’s clear that funds with more 15+ 8.3
exits, more established programs and faster 4+ months 6.9
investment pace have a higher NPS. If fewer
investments and fewer exits persist for a long
period of time, corporate executives might call 10-15 7.9 3-4 months 7.1
into question their CVC strategy.
2-3 months 7.4
5-10 7.4

1-2 months 7.6

1-5 7.3
< 30 days 8.3

STATE OF CVC 2023 24

Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis.
 New Investments in H1 2023 vs. Shift in Mandate by Level of
H1 2022 by Level of Executive Support1 Executive Support1
68%
57%
53%
47% 54%
Executive support is key to the survival of a CVC. 43%
46%
With that said, a CFO exit or change in command
doesn’t necessarily mean the CVC is on the 32%
chopping block with 88% signaling a strong
likelihood of survival.
Historically CVCs have been a black box. Public
company filings rarely call out CVC fund budgets or
performance. Survey data is the best way to peer
More in 2022 More in 2023 or More in 2022 More in 2023 or More independent More strategic More independent More strategic
behind the curtain on how funds are granted same same or same or same
investment authority. Funds with stronger support
Weaker Stronger Weaker Stronger
are making more investments on average and are
becoming more independent or maintaining their
current level of autonomy.
Average New Investments Per Year1 Percentage of Funds Spending at Least
Funds that are more independent tend to have
a sophisticated executive sponsor that understands 40% of Time Managing Corporate Parent1
the fund’s structure. Funds that have weak support
have less autonomy and lean closer to the parent.
They may have to explain their decision-making 13 63%
process and have added layers of scrutiny, which
Funds with stronger
slow deal pace. For funds with weak executive executive support…
support, 63% spend over 40% of their time
managing the corporate parent, taking time away Make more
investments 35%
from dealmaking. 6
Spend less time managing
corporate parent

Weaker Stronger Weaker Stronger

Level of executive support Level of executive support

Notes: 1) Surveyed funds ranked their current level of executive support on a 10-point scale. Funds that ranked
themselves 1-5 have weaker support than funds that ranked 6-10. STATE OF CVC 2023 25
Source: CVC survey results (based on responses from 209 CVC funds) and SVB analysis.
STATE OF CVC 2023 26
 Top Emerging Tech Trends CVC Key Milestones in Generative AI and
Heads Are Watching Funding in AI1 as a Percentage of Total VC
Percent of all funds Examples Percentage of US VC invested Index of Google searches for AI2
The top reason cited for the CVC’s existence is to in AI companies (TTM)
Electrification/Decarbonization,
act as a sensor for the parent company. It’s no Food tech, Plant-based plastics 26%
surprise the technologies making headlines are
top sectors CVCs watch. Climate tech
74% OpenAI OpenAI OpenAI
AI took the world by storm when large language launches launches launches
models became available to the public. Many of Crypto & Web3 GPT-2 GPT-3.5 ChatGPT
these recent breakthroughs have their roots in 50%
corporate sponsorship. Microsoft’s cumulative 34% 20%
21% OpenAI
investment in OpenAI is reported to be $13B. The 21% 19%
18% 18% 19% launches
17% 19%
share of US VC investment in AI companies GPT-4
17%
jumped to 26% for the 12 months ending in Q2 Frontier tech Artificial intelligence 17% 18%
Google
2023, a 10% spike from the year prior. The sheer 15%
16% 16% 16% 17% launches
capital and access to compute required to support Examples Examples 15% Bard
Robotics, IoT, Next-gen semiconductors, Generative AI, AI infrastructure,
the development of large language models have Quantum computing, Novel sensor Non-Generative AI, Multimodal 2019 2020 2021 2022 2023
meant that corporates have an outside role. technologies foundation models
Midjourney, for example, leaned on preexisting
relationships with Google to help secure compute.
Main Reasons for Your CVC Fund’s Existence
Climate tech is another great example of how
Sensor function: Invest in adjacent markets and access to next-generation technology Pure financial rationale with some strategic benefits
businesses are using CVCs as a sensor to adapt
with cutting-edge technologies. While only a few Drive new top-line revenue for the firm Protect the core assets and market share FOMO
funds in our survey are dedicated climate funds, it
was cited broadly. This indicates corporates are Sensor function: Protect the core assets Sensor function: Drive Protect Pure financial Sensor function:
exploring avenues to address ESG goals and adapt Invest in adjacent and market share Invest in adjacent new top- the core rationale with Invest in adjacent
markets and access markets and access line assets some strategic markets and access
to climate change. to next-generation to next-generation revenue and benefits to next-generation
technology technology for the market technology
Given CVC’s pivotal role in tying corporates to the firm share
latest technologies — even among financially

Hybrid
focused funds — CVCs are positioned to maintain Drive new top- FOMO
their status as all-weather investors. They will line revenue for
the firm
more than likely play a key role in shaping the next
wave of technologies from AI to climate tech, Drive new top- FOMO
FOMO line revenue
robotics and beyond.

Financial
for the firm

Financial
Strategic Hybrid Financial

Notes: 1) Deals include the PitchBook vertical “artificial intelligence and machine learning” as of July 17, 2023. TTM = Trailing 12 months.
2) Aggregated search terms for “artificial intelligence” indexed to 100 for the top search month since 2004.
STATE OF CVC 2023 27
Source: CVC survey results (based on responses from 209 CVC funds), State of the Markets H2 2023 and SVB analysis.
Source: CVC survey results (based on responses from 209
CVC funds) and Silicon Valley Bank analysis.
STATE OF CVC 2023 28
 Lead Authors Market Insights Team Authors

Liz Cahill
Senior Researcher,
Silicon Valley Bank
lcahill@svb.com

Mark Gallagher Patrick Eggen Mikey Kailis Charlie Walker Eli Oftedal
Head of CVC, General Partner, Principal, Director, Senior Researcher,
Silicon Valley Bank Counterpart Ventures Counterpart Ventures Silicon Valley Bank Silicon Valley Bank
mgallagher@svb.com patrick@counterpart.vc mikey@counterpart.vc cwalker@svb.com eoftedal@svb.com

Contributors
Kyle Stanford, CAIA
Lead Research Analyst,
Venture Capital,
PitchBook
kyle.stanford@pitchbook.com

STATE OF CVC 2023 29

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FUTURE OFCVC
STATE OF FINTECH
2023 30
Founded in 2018, Counterpart Ventures is a San Francisco based venture
capital fund investing in early-stage startup companies disrupting
traditional industries. With its CVC roots, Counterpart provides access to
potential enterprise customers and strategic partnerships for their
founders. Investments focus on B2B SaaS, mobility and marketplace
technologies that target conventional problems or fill missing gaps in
large markets.

Our Counter Club community represents the most active and engaged
network of CVC funds among any traditional VC firm. We galvanize the
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practices for emerging corporate VCs. Given our successful CVC track
records, we are the rare CVCs turned VCs with the ability to offer impartial @counterpartvc
advice to others. Visit our website for more information on how we invest
and the Counter Club to become a member of our community: Counterpart Ventures

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Counter Club https://counterclub.vc

STATE OF CVC 2023 31

The views expressed in this report are solely those of the authors and do not necessarily reflect the views of SVB or
Counterpart.

This material, including without limitation to the statistical information herein, is provided for informational purposes only.
The material is based in part on information from third-party sources that we believe to be reliable but which has not been
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STATE OF CVC 2023 32