Corporate financing rounds account for the largest share of venture investments

In recent years, a large portion of investments in US start-ups have come from corporate financing rounds.

That’s the overall finding from an analysis of Crunchbase data on U.S. funding rounds backed solely by a corporate investor. These rounds accounted for 12% of total funding in 2023—a high in our survey and potentially a record-breaking share. The strong showing was largely thanks to a single round—Microsoft’s $10 billion investment in OpenAI.

So far, 2024 ranks second in terms of the highest share of funding from corporate rounds, at 7.4% of the total. This is largely due to Alphabet’s $5 billion investment in Waymo, the autonomous vehicle company that emerged from Google’s labs.

Over the past six years, the share of financing from corporate rounds has reached a low of 1.5 percent of total investments and averaged around 5 percent, as the following graph shows.

Corporate rounds show that startup investments are becoming more strategic

While there is no universal motive for the leaders of these financing rounds, in most cases companies support startups and private companies for strategic rather than just financial reasons.

Microsoft, for example, is less interested in how much money and investor return OpenAI will generate. The company is more focused on how its technology and collaboration will help Microsoft stay ahead of the competition in adopting artificial intelligence.

Disney’s $1.5 billion investment in Epic Games this spring was tied to plans to integrate the entertainment and theme park giant’s content into its gaming platform. And the billions General Motors has poured into its autonomous driving subsidiary, Cruise, are, of course, designed to help GM stay on top of the technology.

Given the strategic reasons for closing deals, it’s not entirely surprising that corporate rounds are performing strongly even in a subdued exit environment. Corporate investors can expect a boost to their brand even if there’s no major exit in sight.

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Illustration: Dom Guzman