Assets under management in CVC (Corporate Venture Capital) funds are investments made by companies in startups, early stage businesses or growing companies. These funds help support innovation and allow ventures to seize market opportunities before their competitors discover them.
On average, 83% of medium and large Brazilian companies already have initiatives to invest in startups, according to data from a study by ABVCAP (Brazilian Association of Private Equity and Venture Capital).
In addition, the survey – conducted in partnership with EloGroup, FDC (Fundação Dom Cabral), Wayra Brasil, Vivo Ventures, GCV (Global Corporate Venturing), ApexBrasil and supported by Valetec Capital – revealed that all companies that do not yet have a CVC (17.1%) want to join the modality soon.
Despite the growth of the CVC market in Brazil, there are still a number of questions regarding the subject, says Peter Seiffert, founder and CEO of Valetec. “After all, ‘how do you manage assets in CVC funds?’ and ‘what are the main differences in relation to other types of investment fund?’ are among the main questions that still revolve around the theme”, he says.
Seiffert explains that asset management in CVC funds is similar to asset management in other types of investment funds. However, there are some important differences. It highlights the five key features in the following topics:
1 – Investment objectives: while other funds seek to maximize the financial return on investments, CVCs have additional strategic objectives, such as gaining access to relevant technologies or innovations for the corporation;
2 – Role of the corporation: the owner of the fund can play a more active role in management, providing strategic support, industry knowledge and connections with partners, for example. This responsibility is the responsibility of managers and service providers who help the corporation with more specific issues;
3 – Holding period: CVCs may have a longer holding period for invested startups, around eight years on average, in order to allow them to develop technologies and products relevant to the parent company;
4 – Investment process: CVCs generally have a faster and less bureaucratic investment process than other funds, as the corporation can have a clear vision of its strategic objectives and can make investments more quickly;
5 – Potential for synergies: CVCs can leverage synergies between the corporation and invested startups, for example, through collaborations, partnerships or joint product development;
In summary, the founder and CEO of Valetec explains that asset management in CVC funds is similar to that of other investment funds, but with additional strategic objectives and closer collaboration with the corporation. “With regard to the Brazilian market, this is exploding, as the number of investments in startups only grows”, says Seiffert.
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