VCs value investments based on strategic relationships, acquisition viability,
channel partnerships, product integration, revenue diversity and more. Corporate
VCs may even invest to remove a competitor from the market. This can result
in serious conflict. For example, traditional VCs invested in a company will seek
to maximize return on the investment when that company is acquired. However,
a corporate VC invested alongside a traditional VC in the same company is
incentivized to minimize acquisition price, especially if the intent is to remove
competition from the market.
For the most part, the pros outweigh the cons with Corporate VC, but
knowledgeable investors proceed cautiously.
Middle East Capital Impacting Global Valuations
Another noticeable global trend to recognize is the massive influx of capital
from the Middle East. Middle Eastern sovereign wealth funds have been long-
time supporters of Venture Capital, Private Equity and other asset classes – but
usually as passive limited partners. This is now changing, particularly with Saudi
Arabia. In the past three years alone, Saudi VC firms invested over $5 billion
dollars into US startups, with the pace of investment skyrocketing to all-time highs
in 2016 (see Figure 8).
The Saudi investment boom began in 2015 with over $1.25 billion invested
in US startups across a handful of deals, including some of the largest private,
and now public, companies in the US.
13
Lyft walked away with the vast majority
of 2015's Saudi funding haul, landing a billion dollars from the Kingdom Holding
Company as part of the company's Series F round of financing. Saudi investors
also took part in Snap's $200 million Series E financing. While 2015 showcased
13
Adamson, Loch. "Saudi Arabia Signals Pending Power Shift with Mass Arrests." Institutional Investor,
Institutional Investor, 7 Nov. 2017,
-
signals-pending-power-shift-with-mass-arrests.
46
