Can a Major Firm Be a Venture Capitalist?

Tokyo-based Trend Micro—a force in the cybersecurity industry—announced last week that it is rolling out a $100 million venture capital effort, apparently to fund startups in the internet-of-things space. The idea, in its own words, is “to dive into new areas without disrupting core business resources.” However exciting for the publicly-listed firm, the focus is likely to have a greater impact on its balance sheet than its business operations, at least for the foreseeable future. Corporate venture capital units often invest alongside top-tier funds until they can sort out their own priorities and strategies. The theoretical danger in that scenario is that underlying valuations of target companies get pushed higher and higher, leading to awkward re-pricing on an eventual exit. Trend Micro might serve its commercial interests better by creating a smaller funding pool that centers on still-fledgling opportunities. Of course the hazard there is that a $1-to-$5 million investment can easily get lost in the c-suite. We offer Trend Micro the benefit of doubt, but sustaining an effective corporate venture capital unit demands more than a pool of cash.

Our Vantage Point: Silicon Valley may laud corporate venture capital for adding depth to the startup scene. But the actual dividend to investors and entrepreneurs is unclear.

Learn more at DealStreetAsia.

© 2017 Cranganore Inc. All rights reserved.

Image: In Japanese tradition, the maneki neko is a good luck talisman. Credit: Icenando at Can Stock Photo Inc.