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Role of foreign Corporate VCs in 2016

Posted by Runway on Dec 7, 2015 6:35:00 PM

Matt WaltersI came back from Japan yesterday, energized and slightly jet-lagged with everything going on there. As I mentioned last week, there are a ton of corporate VCs (CVCs) looking to put money into Silicon Valley. The same is true from my trips to China earlier in the year. All of them have the same requests - they are not sure they fully understand, or have access to, the US startup market.

I find this interesting. Janet Yellen announced last week that the Fed will finally be raising interest rates this month. This is something we’ve been on the lookout for for the past 3-4 years, and it’s finally happening. What this means for startups is that there will be higher returns available in other asset classes and less cash available for investment into the private markets. That, along with increasing acknowledgement of the overly aggressive valuations of later stage companies, means that startups will find it much more difficult in 2016 to raise follow on funding.

So on the one hand, last week we saw confirmation that investment from US VCs will be slowing down in the next few months, and on the other that investment from foreign CVCs will be increasing in 2016.

I think there’s a lot of opportunity here for founders who are able to take advantage of it. The caveat of course is that CVCs are always problematic to deal with (see last week’s post). And some might go so far to classify foreign capital as “dumb money.” I don’t think this is necessarily the case, but I do think there are potential pitfalls to taking foreign capital which every founder should be aware of.

Most importantly though, a good founder knows how to survive. How to keep his or her team alive and take advantage of the fact that his or her competitors are suffering as well. We’re going to see this play out in the next few months. And I think that there’s a role foreign capital will play. I’ll be keeping you updated in the weeks to come.

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Topics: Business