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Venture Capital: Corporations Fill a Gap

Cash-rich companies are backing startups with an eye to diversifying

Citi Ventures, Citigroup‘s corporate venture capital arm, has met with over 300 startups since it relocated its headquarters to Palo Alto, Calif., in March of last year. Debby Hopkins, who heads the operation, says the unit isn’t like traditional VC firms that place bets on companies using money raised from outside investors. Instead, Citi Ventures is backed entirely by its parent. And it isn’t investing purely for financial return but rather to keep up with the latest innovations that can bolster Citi’s existing businesses. “[We’re] looking for things that perhaps are adjacent to what we do today or maybe a little more of a stretch,” says Hopkins.

What she has in mind are outfits such as Shopkick, a two-year-old Palo Alto startup that makes a location-based shopping app with 1.9 million users. In July, Citi invested an undisclosed amount in Shopkick in a $15 million round led by VC firm Kleiner Perkins Caufield & Byers. At first, Hopkins’s colleagues didn’t understand Shopkick’s utility for the bank. “A lot of folks had very raised eyebrows,” she says. Its app pings users’ smartphones when they enter pilot Citi branches in the Palo Alto area. A sample message: “Complete a financial review with a personal banker to get 1,500 kicks [reward points].”