The number of CVCs has increased rapidly in recent years. But how are those CVCs actually doing?

What do Anheuser-Busch, General Motors, and Bayer have in common?

If you guessed: They all have in-house VC arms, you win a point.

Corporate venture capital, or CVC, is a bridge between the public and private markets. The funds vary radically in size, structure, and objectives. And though a lot of the big names you might expect have CVCs (take, for instance, Samsung or Toyota), there are also a range of more unexpected companies with venture operations—7-Eleven, Allstate, and Home Depot all have their own venture arms.

While tech companies like Alphabet, Salesforce, and Intel have historically been among the most prominent players in corporate venture, it’s become increasingly de rigueur across many industries and there are a lot more CVCs today than there used to be. Some reports estimate that there are as many as 2,000 CVCs, up from several hundred in 2021.

“More than 70 new CVC units started in 2023, and the number of corporate venture capital organizations grew 10x over the last decade,” said Sneha Shah, EVP and head of new business ventures at SEI, via email.

So CVCs are more ubiquitous than you might have guessed—about one-third of venture-backed companies have a CVC on their cap table, according to data from Counterpart Ventures. They also account for more than 50% of deal value, per PitchBook data from Q1 2024. The AI boom is now bringing even more attention to the sector, as large tech companies make strategic investments in AI startups.

“I don’t want to say it’s the only thing of course, but AI is absolutely a key driver,” says Patrick Eggen, founding general partner at Counterpart Ventures. “Look at the Anthropic deals, look at OpenAI, look at Hugging Face—they all have massive corporate involvement.”

Still, according to Eggen, who was previously the managing director of Qualcomm Ventures North America, it’s not all rainbows and unicorns in CVC land. The environment for CVCs, Eggen says, is actually kind of mixed right now—some CVCs are dialing back investments, while others are doubling down.

"CVC can be the ultimate platform, but it has to be done right,” Eggen says. The big mistake that many CVCs make is to be overly dependent on their corporate parents. To make solid venture investments, a CVC needs to be able to think and act independently of the more entrenched ideas that a parent company might have. And though returning capital is important, it’s not the only thing that matters—large companies also expect strategic gains, whether that’s new technology or a new product geared towards the company’s customers.

"CVCs have to show strategic dividends beyond making money,” said Eggen. “The top decile…if they embrace independence, carried interest, that's how they have that freedom to flourish for ten years.”

As interest rates remain high and economic volatility persists, a corporate parent supporting a CVC right now might be hesitant to experiment or take risks, especially if that CVC was formed in the 2021 run-up.

Does that mean a shakeout is coming for the CVC sector? Maybe. But for the corporate investors that have been in the game for a while, the game will remain the game.

"I'm expecting the market to continue improving,” said Matt Sueoka, global head of Amex Ventures. “It might be relatively slow. While some VC firms or other CVCs that came to be in the last few years may not be active, or may not be continuing, you’re still seeing a lot of experienced fund managers raising really large funds.”

An IPO dispatch…Ibotta, a digital marketing software provider, shares rose 17% in its public markets debut, with the company raising $577 million in its IPO.

See you Monday,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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This story was originally featured on Fortune.com