Venture groups backed by corporate finances invested over $2.1 billion during the second quarter of 2012, a 16 percent increase compared to the same period in 2011. The flow of money into start-ups underscores the attraction the potential for high growth has to their more established competitors despite the advisers struggling with hedge fund risk management.
The investments are being placed in about 118 US companies, one third of the money going to internet-based firms, according to a report which appeared today released by CB Insights, a consulting company.
Healthcare and car/transportation related start-ups taking up about 20 percent each.
Most of the transactions involved investors from traditional firms which specialize in venture capital deals, such as Sequoia Capital, Index Ventures, and First Round Capital.
Large corporations have a vested interest in start-ups so that they can carefully observe the development of new technologies and the talent in their fields of expertise. The main motivators are the strategic decisions and directions made by the smaller and more innovative companies, rather than the potential financial gain which may or may not be realized.