Families in Corporate Venture Capital

Abstract

We show that families are an engine of venturing activities: one third of corporate venture capital (CVC) deals in the US from 2000 to 2017 originated from family firms. Family firms have a distinct approach to corporate venturing: they syndicate more often, join larger syndicates, and make more proximate deals (geography- and industry-wise), especially when investing in younger ventures and when the parent organization is led by a family CEO. This investment style maps into performance results: family CVC-backed ventures exhibit a higher likelihood of successful exit, better market performance, and more valuable innovation post-IPO. After the IPO, founders are more likely to maintain control when their venture is backed by family CVC investors. At the level of the parent organization, we find that family firms generate more shareholder value than non-family firms from their CVC activities. Moreover, family CVC activities are less sensitive to an external financial shock.

Keywords: Corporate venture capital; family ownership; investment; performance

JEL Classification: G24; G32; O32