Last In, First Out -- Corporate VCs
As the Wall Street Journal puts it (subscription required),
An unflattering acronym -- LIFO, as in "Last In, First Out" -- sums up the venture capital industry's often skeptical view of corporate venture investing.
The recent boom-bust VC cycle did nothing to improve that general reputation.
...Corporate venture capital, led by some stalwarts such as Intel Corp.'s Intel Capital group, accounted for about 6% of annual U.S. venture investing overall in the years immediately prior to the late-1990s run-up, according to PricewaterhouseCoopers LP, in conjunction with the National Venture Capital Association and Venture Economics.
By 2000 -- when IPO riches had become commonplace and start-ups seemingly went public overnight -- the portion attributable to corporate investing had ballooned to 15%, meaning corporate venture capital grew at more than twice the industry rate even as VC investments overall reached a record $108.2 billion, from a mere $16.5 billion in 1997.
...Corporations, meanwhile, have been at the vanguard of a subsequent major retreat in venture investing overall, with corporate VC sliding to just under 9% of the $12.3 billion total through the first half of 2002.
Tracy Lefteroff, global managing partner for PricewaterhouseCoopers' venture capital practice, expects the trend to continue, saying corporate venture capital likely will stabilize near its pre-boom, 6% level.
Dell Computer spokesman T.R. Reid said Dell Ventures remains committed to gaining access to new technologies through venture investing. But the company simply isn't seeing as many of the late-stage deals that it considers a specialty, he said, because early stage funding has been much harder to come by for start-ups and entrepreneurs.
"What's changed is the flow of deals beneath our objectives," he said.
As of May, the value of Dell Ventures' portfolio had slid to $254 million, off from $719 million a year earlier and from nearly $2 billion during the heady days of the stock-market bubble. Dell took a $370 million charge in last year's second quarter to write off some soured investments, although Reid maintains that gains from VC investing still have outweighed the company's losses.