European corporate venture capital teams should reflect on their rights in light of falling valuations, revised exit expectations, and other challenges.

By Richard Butterwick, Beatrice Lo, Shing Yuin Lo, Mike Turner, Jon Fox, and Catherine Campbell

This year has been challenging for venture capital (VC). Valuations of VC-backed companies listed on the public markets dropped by 74.2% in the first half of 2022, and evidence indicates private valuations are also declining. While the downturn underlines growing challenges for early and late-stage emerging companies, it also presents risks and opportunities for large corporates, who have significantly increased their presence in VC deals in recent years — with participation growing by 462.5% in the decade to 2021. In Q4 2021, corporate VC participated in 2,858 deals with an aggregate value of US$98.7 billion, a record high.

Given the significant increase in the number of corporates participating in the VC and growth equity space, many corporate VC teams will be dealing with a downturn for the first time. In our view, corporate VC teams should proactively seek to understand any downside protections they benefit from in order to position themselves to manage risk and maximise prospective opportunities.