A fast-growing company recently called me up for some advisory work. One of its main competitors, a multibillion-dollar company, was making overtures for an acquisition. The sides started to talk and found they had both synergies and major disagreements about valuation and strategy. So the discussions moved to another approach: a strategic investment.
Such investments are the lifeblood of the venture capital industry and an increasingly popular tool for large companies. Some even have their own venture capital entities, known as corporate venture capital, or CVC, arms. Perhaps the most famous is Intel Capital, which has invested $7.5 billion in about 1,000 companies since 1991, according to the company. Notable transactions include investments in Clearwire, Broadcom (BRCM), MySQL, Red Hat (RHT), and Research-in-Motion (RIMM).