Over the past five years, corporate venture capital (CVC) has consistently accounted for 16-17% of total global venture funding[1], underscoring the pivotal role that corporates play in shaping high-performing, innovation-driven ecosystems worldwide. This consistent contribution places them among the most influential stakeholders in the venture capital landscape. While CVC activity has generally been quite stable, it still exhibits long-term cyclical patterns oftentimes in reaction to shifts in the broader macroeconomic environment. Following the dot-com bubble for instance, an estimated 64% of the 500+ active corporate venture units in 1999 had become inactive by 2004[2]. This wave of retrenchment highlighted how CVC momentum can evaporate in the face of major economic disruptions.
Over time, the CVC landscape has absorbed lessons from past cycles. In the most recent surge of activity, corporate venturing became more deeply integrated into firms’ broader open innovation strategies. This has resulted in the longest CVC activity growth cycle we have ever seen of over two decades.
Yet, we may be at another inflection point today. Following a record high in startup and venture activity in 2021, market headwinds are once again driving a pullback in corporate venturing. Our own analysis shows that nearly 200 CVC units established since 2019 have not made a single new investment since December 2023.
There are multiple reasons a CVC program might stall or be wound down during a downturn:
- short term financial pressure with a necessary focus on core operations
- a major shift in corporate strategy
- leadership changes
- the CVC unit’s inability to create enough business value
In the current context, a persistent lack of liquidity and limited exit opportunities appear to be compounding these structural pressures. Without a clear path to strategic and financial returns, CVC teams often struggle to justify their continued relevance or even existence to senior management – particularly when cost discipline takes center stage.
Having advised multinational corporations on innovation and venturing strategies for over two decades, we have seen firsthand the challenges that can undermine the trajectory of a CVC program. Drawing from this experience, we observe that when a corporate realizes its venture activity is no longer delivering the desired impact or has gotten off track, three distinct scenarios typically emerge – each reflecting different levels of commitment to corporate innovation and varying appetites for reinvention.
Scenario A: Sell the portfolio to a secondary buyer
Selling the portfolio to a secondary buyer is often viewed as the most straightforward exit strategy when a corporation decides to fully discontinue its venture activities. This approach has gained growing attention, especially amid increased demand for liquidity across private markets. Given the usual anti-cyclical nature of secondary activities, it isn’t surprising to us that secondary transactions have rapidly become a defining trend in the current environment, earning them the status of “flavor of the year”. In 2024, the global private secondaries market reached a record-breaking USD 152 billion in transactions[3]. In venture capital specifically, secondaries are now estimated to comprise round volume, up from just 14% four years ago, according to Sifted[4]. Notably, StepStone, a leading player in secondaries, closed a record USD 3.3 billion venture-focused fund mid-2023.
For corporate investors seeking to fully exit the CVC space, selling the entire startup portfolio in one transaction – often referred to as a strip sale – can appear attractive. It promises a clean break, administrative simplicity, and immediate liquidity. However, this scenario is frequently overestimated in terms of feasibility and financial outcome.
While increased competition on secondaries has somewhat narrowed bid-ask spreads, secondary sales still rarely deliver valuations that align with a corporate’s internal expectations. Offers from secondary buyers with up to 80% discount on the last portfolio valuations are not uncommon. This is particularly the case when assets are early-stage, in need of substantial follow-on capital and/or when portfolios are concentrated around just a few (large) positions. Even when more nuanced structures like earn-outs are introduced, the price point may still fall significantly short of the corporate’s aspirations – forcing a substantial write-off and foregoing future upside.
Beyond financial considerations, the strategic and reputational impact of a full-scale wind-down through a secondary sale is often underestimated:
- Loss of ecosystem access: The company severs its pipeline into the startup innovation ecosystem, limiting exposure to emerging trends, technologies, and partnership opportunities, thereby also undermining its culture of innovation.
- Reputational damage: Exiting CVC entirely can erode the firm’s credibility as an innovation-forward organization, particularly among entrepreneurs, co-investors, but also talent.
- Organizational setbacks: Years of internal learning and operational know-how in corporate venturing are lost. This not only handicaps future innovation efforts but can also “burn the concept” internally, making it harder to reboot similar initiatives in the future.
In short, while selling to a secondary buyer may seem to provide an efficient path to liquidity and closure, it often comes with deep financial drawbacks and long-term strategic trade-offs.
Scenario B: Outsource liquidation of portfolio and sell over five years
In this scenario, corporates look to increase chances of financial return from their existing portfolio while minimizing direct internal involvement. Partnering with an external asset manager is an advantageous option to outsource liquidation efforts and reduce related costs, although based on our experience and to ensure continuity, it is strongly advised that at least one experienced individual from the original CVC unit or broader corporate innovation team remains involved. This person’s deep understanding of the portfolio, the founders, and deal history is critical in managing risk, optimizing outcomes, and supporting an effective handover to external partners.
Rather than being a one-size-fits-all option, this scenario contains various degrees of complexity and nuance, all primarily dependent on the parent company’s willingness to allocate further capital for follow-on investments (and management fees):
- High-engagement model: The corporate provides all reserves for follow-on funding. This setup demands strong internal alignment and executive buy-in, which can be difficult to secure when the CVC unit is underperforming, under scrutiny or generally in a phase-out mode.
- Low-engagement model: Follow-ons are financed externally by the asset manager itself or – more commonly – by third-party financing partners such as family offices, high-net-worth individuals, or secondary buyers. Partnering with an external asset manager can be beneficial to corporates to help them access these specialized financiers in the market.
- Hybrid models exist in-between, blending the use of internal and external capital reserves.
Bringing in external capital partners can be appealing – particularly when a portfolio contains a few standout performers likely to deliver returns. However, this route comes with significant structural implications, as third-party financiers will negotiate preferential rights, including liquidation preferences, priority repayment, or preferred equity, to secure their position particularly in adverse scenarios. As a result, corporates may find themselves last in line to benefit from upside and, in less successful portfolios, may receive little to no return after exit proceeds are first used to recover other investors’ invested capital.
Next to these financial considerations, corporates should, under Scenario B, also be mindful of the broader strategic and organizational implications – similar to the ones exposed under Scenario A – that a winddown, albeit more progressive, of their venture activities may have.
Scenario C: Turn into an evergreen solution with CVCaaS partner
For corporates that wish to retain a long-term commitment to open innovation but are looking to professionalize and streamline internal operations and reduce venture-related overhead, realigning CVC operations through a CVC-as-a-Service (CVCaaS)[5] partnership offers a compelling strategic path. This approach enables companies to maintain startup ecosystem access, preserve their innovation brand, and optimize strategic returns and business value, all while delegating the operational and investment-heavy components of venture capital to an external specialist.
Unlike a liquidation or progressive wind-down, this scenario centers around transforming the corporate venture unit into a leaner, strategically focused model. Non-strategic functions – such as sourcing, due diligence, transaction execution, and portfolio management – are handled by a dedicated external CVCaaS partner. Meanwhile, the corporate continues to define the innovation strategy and pace, determines the setup governance, and retains control over the investment committee.
This model allows the company to shift its focus from capital deployment to strategic value creation by freeing and reallocating internal resources toward, e.g.:
- Venture building and incubation
- Startup collaborations and pilot orchestration
- Open innovation initiatives such as licensing, Joint Development Agreements (JDAs), Distribution Agreements, Joint Ventures, strategic Sourcing Agreements and many others
- Intrapreneurship programs
These value creation activities can be applied on the existing business to impact top and bottom line or towards building entirely new businesses, strengthening the connection between external innovation and internal impact.
A key benefit of this scenario is the potential to build an evergreen investment structure – an ongoing platform that can flexibly invest in new opportunities if and when needed, while managing existing portfolio assets for optimal value and liquidity. Investment speed can be scaled up or down as may be required. Unlike Scenario B, which involves sunsetting the fund or investment platform, Scenario C is designed for continuity and resilience in alignment with the long-term strategic ambitions of the company. The option to continue funding performing assets and make selective new investments remains possible, while the CVCaaS partner is responsible for managing the portfolio, monitoring the market, optimizing exit timing and proceeds, and finding potential liquidity opportunities, including during macroeconomic downturns. However in this scenario, corporates are typically expected to provide some financial reserves for follow-on and new investments themselves. Yet, if an existing portfolio holds some value and if some of the assets can be sold, the amount of additional financial commitment may not be very substantial. As mentioned in Scenario B above, this will still require strong management buy-in. In the context of Scenario C though, this will allow the corporate to retain the ability to stay active and relevant in fast-moving innovation landscapes, without being constrained to rely on and give up portfolio value to third-party financing partners nor to scale up internal VC capabilities again.
Scenario C offers a resilient and future-oriented alternative for corporates that value long-term innovation engagement but seek to right-size and professionalize their CVC operations. This model is all about leveraging the strength of corporate resources, the expertise of a CVCaaS partner and valuable external innovation. Rather than a shutdown, it puts emphasis on a strategic reset of corporate venturing activities.
Finally, this scenario also demonstrates to the start-up world that the corporation is a reliable innovation and business partner with a long-term perspective. This builds the trust and credibility entrepreneurs value and remember, particularly when they are in a position to choose their ideal partner.
About Emerald: With over 25 years of experience at the intersection of corporate innovation and venture capital, Emerald has supported numerous CVC teams navigating complex transitions and distressed situations. Today, we support four multinational corporations through our CVCaaS model, helping them preserve access to innovation, refocus their efforts, and make the most long-term strategic and financial value from their venture activities – no matter the market conditions.
[1] State of Venture 2024, CB Insights, 2025
[2] The Art of the Corporate VC Divestiture, Industry Ventures, 2015
[3] Secondary Market Report 2024, Lazard, 2025
[4] What’s going on with secondaries, Sifted, 2025
[5] “Corporate Venture Capital-as-a-Service” is a model where a specialized partner acts as the operational extension of a corporate’s venture arm, taking on the end-to-end investment process while the corporate retain governance and strategic control as well as investment decision-making power.
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