Sand Hill Road Invasion: Corporate Venture Capitalists

High-profile, billion-dollar start-up sales like those of Instagram, Tumblr and Waze have drawn the attention of a wide range of investors, and now some of the world's largest companies want a piece of the action.

Since May, several major names, including Microsoft, General Electric and Bloomberg, have launched venture capital firms. They're trying to profit from start-ups' innovations as well as figure out how to hedge against being disrupted by those innovative technologies.

More than 750 companies worldwide had corporate VC as of last fall, according to a report from Global Corporate Venturing.

And corporate VCs are crucial to the venture industry. In the first quarter, corporate venture investors were involved in almost 17 percent of all deals, contributing 7.8 percent of all venture dollars, according to PricewaterhouseCoopers and the National Venture Capital Association MoneyTree Report.

Citi Ventures Managing Director Vanessa Collela said she's interested only in companies in Citi's wheelhouse that can benefit from its expertise, and give the bank insight into a key area.

"We want it to be strategic for Citi because we think it's a place where we can add value," she said. "We also want it to be strategic for the start-up."

Collela likes to look in unexpected places—such as Detroit—that might not be considered traditional entrepreneurial hotbeds. But when it comes to category, she's focused on payments and cybersecurity.

"We're investors in Square, and [the payment space] has been a big area for us, but there are a lot of areas that are critical," Collela said.

Citi Ventures also has invested in a number of security systems: Pindrop Security, Click Security and Silver Tail Systems, which detects and prevents fraud. In digital payments, it has put money into Linkable Networks, which can provide coupons and offers directly to a credit or debit card.