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Chapter 11. Other Venture Capital Investors > Corporate and Other Investors

Corporate and Other Investors

Introduction

Industrial companies in the United States invest large amounts of money in R&D, most of which is invested within the companies themselves. In recent decades companies, some of which also invest in venture capital funds, have started channeling large amounts of money to direct investments in companies and to the development of in-house startups in various formats.

The high rates of return demonstrated in the 1960s by venture capital funds motivated companies to establish investment organizations within the companies. The basic idea was to take advantage of the know-how accumulated in the companies and their surplus cash to yield higher returns than the company itself could generate. A mid-1970s crisis in the capital market drove most of the investment funds which had been founded within the large companies away from the market, but with the revitalization of venture capital funds starting in the early 1980s, the number of industrial companies investing in startups and creating their own venture capital funds increased. The 1987 crisis in the capital market landed a hard blow on these programs and their number declined again. Since then, though, many companies chose to focus on seeking strategic investments for the company and to invest money in external venture capital funds to gain a high return in the venture capital market.


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