How to get the most from your corporate VC after you get the check – TipsClear
CFO, a fast-growing startup at Scott Cruise Consulting, runs operations at a consulting firm. Cruz is based in San Francisco with clients in the Bay Area, Los Angeles and New York.
15 things to be aware of before accepting funding from a corporate VC
What do startup founders need to know before negotiating with a corporate VC?
Bill Gradney, a partner in Goodwin’s technology and life sciences group, focused his practice on advising technology and other startup companies through their full corporate life-cycle.
Raising capital from A corporate VC can bring many benefits beyond just money. Strategic CVCs, which measure ROI based on the strength of strategic partnerships with their portfolio companies as well as financial returns, will typically seek to maximize their relationships with startups long after they are invested.
Specifically, the CVC investor may offer the following to an entrepreneur:
Resources and Product Feedback. CVC parent companies often have deep institutional expertise and a team of subject-matter experts who can advise startups on product development and guide them through issues.
Participation. CVCs can leverage their supply chains and operations to create new partnerships, otherwise startups may take months or years to build.
Delivery. A strategic CVC can become a distribution channel for a startup, connect that startup to its suppliers, or even use the startup to become a channel for the parent company.
Branding halo. If a large company is willing to invest in your startup, it is a strong indication that your product is good and the future of your business is bright.
Acquisition. Many CVCs invest in startups so that they can acquire the line. A CVC may also support an exit-seeking portfolio company to its partner companies or suppliers.
Granted, it takes time to see the consequences of these benefits, and even the best of intentions may not always be an optimal strategic relationship during the capital raising process.
Here is a list of factors to keep in mind for founders who want the best chances of a productive and successful relationship with their CVC.
Know which type of CVC you are watching from the beginning. In our previous posts, we outlined three types of CVCs – experienced institutional investors, industry-specific strategic and beginner or “tourist” CVCs. As we discussed, be sure to spend time interviewing and building relationships with CVC to see what they are like, what kind of benefits and resources they can provide and how to successfully partner with startups over time In terms of what their history looks like. When in doubt, ask other founders who have done deals with them!
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