The history of big companies playing at being venture capitalists hasn’t always been pretty.
It’s a history riddled with write-downs, tensions with the corporate mothership, and shuttered and re-opened funds, as our History of Corporate Venture Capital shows.
Just as one example, when the dot-com bubble burst, Microsoft, Intel, and Wells Fargo had to write down over $7B between them in failed startup investments.
And there have been some bizarre byproducts, such as Exxon’s 1980s attempt to spin off part of its venture holdings into a computer business.
But sometimes big companies can win with their corporate investing. One such hit was Coca-Cola's $10M bet on Spotify back in 2012 at a reported $3B valuation.
When Spotify went public earlier this week, it did so at $29.5B.
Coke’s was a small investment, so the financial outcome is secondary. But consider what Coca-Cola gained: a front-row seat to the development of music streaming as well as several marketing partnerships co-branded with Spotify.
For a music-centric brand like Coke, it was a home run. What did Spotify get?
Many startups are understandably reluctant to take money from the Fortune 500, thinking they have nothing to gain from having slow-moving “dumb money” on board, and prefer to stick with tech-savvy Silicon Valley VCs.
But consider that thanks to Coke, when Spotify launched in Mexico, it had its brand plastered all over Coca-Cola products. The same playbook was followed in other country launches.
Fred Wilson of Union Square Ventures joked at our annual Future of Fintech event that big companies should buy startups rather than dabble pointlessly in VC investing.
But Coca-Cola’s experience with Spotify shows that big companies investing in startups isn’t necessarily a hollow exercise.
Have a great weekend.
P.S. On April 17, we'll be discussing the future of protein. Save your spot here.
This week in data:
87 million: Earlier this week, Facebook announced that data on as many as 87M of its users, most of them in the US, may have been improperly shared with Cambridge Analytica. The previous estimate was just 50M. As tech companies collect more and more personal data, we looked into how blockchain technology could play a role in giving individuals more control over their information.
12.5 minutes: Yesterday, US Surgeon General Jerome Adams issued an advisory recommending that more Americans carry naloxone, the opioid overdose-reversing drug. According to Adams, 115 Americans die of an opioid overdose each day — or one person every 12.5 minutes — and over half of overdoses occur at home, where friends and bystanders might be able to intervene. We recently looked into startups focusing on opioid alternatives to pain management, from new drug therapeutics to virtual reality games.
- $30B: This week, music streaming unicorn Spotify went public. The company raised $7.36B at a nearly $30B valuation in its IPO. Spotify’s previous investors include Norwest Venture Partners, Goldman Sachs, and Accel Partners, among others.
- 3: While on the subject of $1B+ exits, Spotify is one of at least 3 companies to reach unicorn exit valuations this week. Shanghai-based bike-sharing platform Mobike was acquired by Meituan for $3.7B, while China-based food delivery company Ele.me was acquired by Alibaba group for $9.5B. Check out our Unicorn Exits Tracker for more $1B+ IPOs and acquisitions, updated in real-time.
- 5th: California-based Wild Earth Inc. is a startup working on pet food with lab-grown proteins. The seed-funded company plans to use a direct-to-consumer model to sell its initial product, a dog treat made from koji, a fungus. According to a study conducted by UCLA professor Gregory Okin, “if American pets were to establish a sovereign nation, it would rank [5th] in global meat consumption.” We took a deep dive into the future of the growing meatless industry.
- 11 years: Fashion community platform Polyvore has been acquired by Montreal-based fashion platform SSENSE. In its announcement, the 11-year-old Polyvore stated that it would discontinue operations immediately. We looked at the different ways the fashion industry is changing, from design to merchandising, in our Future of Fashion report.
- -35%: The board of advertising giant WPP is looking into whether chief executive Martin Sorrell has “misused company assets.” 73-year-old Sorrell is also facing allegations around improper personal behavior. Sorrell has been associated with WPP since 1986, helping to grow the company, which works with some of the biggest corporations today — including Ford Motor Co. and Unilever. But as a result of industry pressures and rising competition from tech giants, WPP’s stock has fallen about 35% over the last 12 months.
- $445M: The amount raised by Indian e-commerce unicorn Paytm in Series B financing from Alibaba Group and SoftBank Capital. The round brings the company’s total disclosed funding to $645M, and raises its valuation to $1.9B. We recently analyzed Paytm’s moves in the financial services space, and how the company’s offerings have evolved and diversified since its launch in 2010. Expert intelligence clients can access the analysis here.
- 32%: Residents of Baxter Street in LA sent a letter to Waze suggesting that it remove the street as a shortcut option. Normal traffic flows in LA have been upended by GPS apps for a few years now, but the disruption has been especially dramatic on Baxter Street. With a 32% grade, Baxter is one of the steepest streets in LA, and often a site of car accidents. Waze reportedly said it could not remove the shortcut suggestion because it would involve a difficult change to its algorithm.
- 8 pounds: German scientists have successfully grown a crop of vegetables without earth, daylight, or pesticides in Antarctica. The initiative was part of a project to help astronauts harvest food on other planets. The team has picked 8 pounds of salad greens, consisting of 18 cucumbers and 70 radishes. The vegetables grew inside a high-tech greenhouse surrounded by -4 degree weather. We dug into technologies affecting the agriculture industry here.
- 10,000: According to a new report by a team of astrophysicists at Columbia University, the supermassive black hole at the center of the Milky Way may be surrounded by about 10,000 other black holes. The discovery is significant, as until now scientists had found evidence of only about five dozen black holes throughout the entire galaxy.