JULY 202419development departments, several major corporations established dedicated CVC units.The key focus of CVCs was on early-stage startups, particularly in the technology, telecommunications, and e-Commerce sectors. These investments were strategically aligned with the parent company's goals, aiming to enhance core business capabilities and explore new revenue streams.For example, Reliance Industries launched JioGenNext to invest in promising mobile internet and digital services ventures. Similarly, Infosys launched a $500 million Innovation Fund to invest in AI, automation and other advanced technologies that could enhance its core business offerings, with early investments in WHOOP and CloudEndure.The Resilience & Strategic Shifts during COVID-19The pandemic ushered in a period of uncertainty that impacted the global economy. However, unlike previous crises like the dot-com bubble of 2000 or the 2008 global financial crisis, which stifled CVC activity, India's CVC landscape displayed surprising resilience.Corporations recognise the long-term value of maintaining their investment activities even during economic uncertainties. Notably, there was a shift towards sectors that became critical during the pandemic, such as healthcare, edtech, and digital services, driven by the increased demand for solutions to pandemic-induced challenges.CVC arms adapted to the new normal of remote operations, leveraging digital tools to manage investments, conduct due diligence and support portfolio companies. The period highlighted the strategic importance of CVC as corporations sought to invest in startups that could provide resilience and innovation in the face of global disruptions. For example, Maruti Suzuki India strategically invested in a Noida-based SmartKar, a company offering contactless car buying solutions, after identifying a shift towards online platforms and contactless transactions during the pandemic.The Post-Covid Acceleration & MaturityPost-2021, CVC in India entered a rapid acceleration and maturity phase, marked by significant growth in investment volumes and strategic diversification. Despite a global slowdown in venture capital funding, from $25.7 billion to $9.6 billion over 2022-2023, India remained a key destination for VC and growth funding in Asia-Pacific.Persistent inflation, high interest rates, and geopolitical uncertainties have brought about the slowdown. Even the deal volume has decreased from 1,611 to 880, and the mega-rounds have plummeted by almost 70 percent. However, smaller deals showcase more resilience, signalling long-term optimism for India's prospects.Corporations often partner with startup ecosystem enablers, like T-Hub, O-Hub, Kerala Startup Mission, and other state-led startup ecosystem enablers to help them identify startups across various high-growth sectors, such as fintech, mobility, generative AI, e-Commerce, and sustainability. Even traditional sectors with strong fundaments, such as banking and healthcare, are gaining prominence among corporates.There has also been a rise in industry-specific CVC units. Corporations acknowledge the value of deep industry knowledge during startups evaluation within their specific domain. This focus fosters a more targeted investment approach, wherein corporations tailor their support for startups that can address specific industry challenges.Tata Motors exemplifies this trend with the launch of Tata Motors Mobility, a dedicated CVC unit that focuses on investing in startups developing innovative electric vehicles and mobility solutions. The unit aligns with Tata Motors' strategic vision for a sustainable future.Overall, the evolution of CVC in India reflects a broader global trend of increasing corporate engagement in a maturing startup ecosystem. With continued support from the private and public sectors, CVC is poised to play a crucial role in fostering innovation and driving economic growth in India. CVC arms adapted to the new normal of remote operations, leveraging digital tools to manage investments, conduct due diligence & support portfolio companies
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