By Viola Stadler
Together with our friends at Körber Digital, Project A, as an operational venture capital firm with strong roots in building joint ventures, recently hosted an event that explored the essential elements of investor readiness for corporate ventures and delved deep into the fundraising process, providing valuable insights and strategies on this crucial aspect of building a business.
Here are some of the key takeaways that CVB units need to consider to be successful in fundraising for corporate start-ups:
#Embrace external investments
The idea of opening up corporate ventures to external investors and raising rounds of funding is becoming increasingly common among the players in the game. It is a trend that many industry leaders are considering as they explore new avenues for growth and innovation.
#Look for clean cap table structures to avoid investor challenges
Traditional VCs prefer cap table structures that provide clear incentives for founders. Retaining a majority stake in portfolio companies could create barriers to securing the investment. Despite this challenge, there are successful examples that provide significant equity incentives to founders and have been able to build fundable cap tables and fundable companies.
#Be aware of the importance of independence
While independence in cap table structures is an important factor in attracting investments to corporate ventures, operational independence is also critical. The ability of the company to block future shareholder decisions can be a significant deterrent to investors. Restrictions on customers or competitors may also be considered.
#Empower venture teams and founders
In the fundraising process for corporate ventures, the engagement of the venture team is critical to success. By empowering venture teams and providing them with the necessary resources, corporates can ensure that their ventures have the best possible chance of securing the funding they need. While ownership remains with the venture, leveraging the company’s contacts and expertise can be a significant advantage in this process.
#Strategic Alignment and Unicorn Path
When raising a round for a corporate venture, there are critical factors to consider before and after the round. One such factor is the strategic direction of the venture. It’s important to clearly understand the desired exit strategy and whether it is compatible with VC requirements or more suitable for the company’s core business. By being aware of these factors, corporate ventures and the responding corporate can position themselves for success and chart a clear path to unicorn status, with all that this entails.