The Corporate Venture Capital (CVC), according to the definition of the Kauffman Foundation, refers to the investment in shares that a corporation makes in a venture. Unlike individual investments, where the focus is primarily financial return, corporations seek strategic benefit in addition to economic gain.
Key Insights on Corporate Venture Capital (CVC)
This concept highlights two essential points: the interaction between the corporation and the venture, since the former invests resources in the latter, and the fact that there must always be an investment.
The corporation's objective in making CVC investments goes beyond the financial. If it were just that, the corporation could choose to invest its excess cash in bonds, stocks, or other financial instruments. However, the CVC has a strategic objective, in addition to the financial one, which seeks to increase the return on invested capital.
A recent report from MIT Technology Review emphasizes the importance of CVC in the regional innovation system. Two sectors that have significantly benefited from this trend are fintechs and healthtech.
Corporate Venture Capital (CVC) Reshaping Innovation in Latin America
It is often thought that Corporate Venture Capital (CVC) is an alien reality to Latin America, but this is far from true, especially in the context of fintechs. According to a special report by MIT Technology Review in Spanish, the CVC has played a key role in innovation in the region. Indeed, it has been a key piece in turning Latin America into one of the leading fintech regions worldwide.
A report by the Latin American Association of Private and Entrepreneurial Capital (LAVCA) reveals that the CVC represented 13% of all venture capital investments in the region in 2020, with an investment volume of US$525 million. This research from MIT Technology Review also indicates that the sectors that benefit most from these financing mechanisms are fintech and healthtech.
In addition, the growth of concern for sustainability has favored solutions related to climatech. These technologies are gaining acceptance, especially among companies in the region that participate in the global market and must comply with the decarbonization indicators of Europe and other markets.
CVC: Beyond Startups
It is important to highlight that the CVC is not limited to investing in startups, but also presents itself as an ally to expand the innovation ecosystem and increase the competitiveness of companies. This means that companies have recognized that they can use the CVC to channel their investments in innovation through technological ventures, thus enriching the entire ecosystem.
This phenomenon does not mean that the entrepreneurial spirit is diminishing, but rather that large companies, both in Latin America and in other parts of the world, have discovered the innovative capacity that usually characterizes entrepreneurs. This quality can be difficult to replicate in large companies or companies with a long history. In the case of traditional banks, they have formalized this capacity to respond to the market through the so-called "speedboats."
The fintech ecosystem in Latin America is one of the most dynamic and competitive, with more than 2,000 startups offering innovative financial solutions to millions of users. Some of the largest and most successful companies in this sector, such as Nubank, Ualá, Kavak, Bitso and Creditas, have found in the CVC a crucial factor for their development.
Latin America's CVC Landscape
In addition to fintechs, other sectors also benefit from this strategy. Chile, Colombia, Mexico and Peru are the most attractive countries for CVC investors in Latin America. Among the most active players in this field are insurers, telecommunications and pharmaceutical companies, all looking for new technologies, business models and entrepreneurial talent.
Healthtech is another sector that has grown in importance, especially during the pandemic, with startups offering digital health, telemedicine, biotechnology, and diagnostic services. The CVC has contributed significantly to driving this market, investing in companies such as iClinic, Alice, Memed and Dr. Consulta.
The CVC represents an opportunity for large companies to connect with the fintech and healthtech ecosystem in Latin America, generating synergies and alliances that benefit both corporations and startups. This collaboration fosters innovation and contributes to the growth of the region in these key sectors.