CVCs Gain Ground in India with Advantage in Long-Term View for Deeptech In 2024, Bain & Company's India Venture Capital Report finds that CVCs stepped up meaningfully: their deal volumes increased approximately 1.8 times versus 2023, and their share of India's overall VC deal volume rose to 20 per cent, up from 16 per cent in 2023.
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Corporate Venture Capital (CVC) firms have a disproportionate advantage over traditional VC firms, especially in areas such as deeptech, in terms of long-term mapping, said Adarsh Sekhar, Partner, IBM Ventures.
In 2021, IBM committed USD 1 billion to strengthen its partner ecosystem in India, focusing on hybrid cloud, AI, 5G, cybersecurity, data, and automation, via a strategic alliance with Tech Mahindra.
"Philosophically, IBM has not been in corporate venture for very long," said Adarsh Sekhar, Partner, IBM Ventures. "In 2021, we finally launched our corporate venture capital fund with a focus on powering innovation for the enterprise."
According to Sekhar, the venture arm looks at nearly a thousand startups globally and invests in only about ten of those - signalling a very small hit rate at 1 per cent, signalling the high strategic and financial bar that CVCs have to set.
"Quantum computing has always been important to us. We want to build a global ecosystem for new algorithms in material science, drug discovery, and portfolio optimization, regardless of whether it runs on IBM's hardware or competitors. Deep tech is where large CVCs like us have a disproportionate advantage because we can take a long-term view that traditional VC funds, bound by a 10-year cycle, often cannot," said Sekhar.
CB Insights' data on India's CVC-backed financing surged to a quarterly high of about USD 3.1 billion alongside 58 CVC deals in 2021 before normalizing through 2022-23, when quarterly CVC funding typically ranged around USD 0.2-0.4 billion and deal counts hovered roughly 16-32 per quarter; notably, early-stage rounds accounted for 62 per cent of India's CVC deals in 2023, underscoring CVCs' continued appetite for younger companies.
Sony's corporate venture arm, the Sony Innovation Fund, has actively invested in Indian startups, focusing on sectors with strategic relevance to its business. Notable India-related investments include an INR 120 crore (~US$14.6M) Series B round in Lokal, a hyperlocal platform.
Yoko Fukata, Director, Head of Sony Ventures India, said that the global conglomerates' investment arms act as the eyes and ears of Sony's business units, with the emphasis not just on capital but adding value by opening up Sony's wide ecosystem, from electronics and sensors to music and entertainment."
"In the past, we were more sector-agnostic and invested for financial returns. But we found that startups where we engaged deeply with business units actually delivered stronger financial outcomes too. In India, we are focusing on deep tech and entertainment, areas like semiconductors, quantum computing, and energy efficiency," said Fukata.
Fukata also spoke on the interesting approach a CVC takes when it comes to treating its investments, especially in markets such as India. Sony also acts as a customer to one of its portfolio companies in the health-tech sector. "That's the simplest kind of collaboration – Sony using products of the startups we back."
"Collaboration can take many forms, joint pilots, proof-of-concepts, or Sony becoming a customer. But we are careful to only connect startups to business units when they're ready, to avoid wasted effort."
"We know both sides, the startups' needs and the corporates' expectations, and that helps us act as real matchmakers," said Fukata.
In 2024, Bain & Company's India Venture Capital Report finds that CVCs stepped up meaningfully: their deal volumes increased approximately 1.8 times versus 2023, and their share of India's overall VC deal volume rose to 20 per cent, up from 16 per cent in 2023.
Prominent CVC-backed rounds, including Meesho and PharmEasy by Prosus, Atlan by Salesforce Ventures, and Shadowfax by Flipkart Ventures - further evidence that, even as total venture capital rebounded, corporates' strategic balance-sheet capital became a larger slice of India's dealmaking "till date."
