My advice to Entrepreneurs considering Corporate Investors

Very early in my career, (the late 80’s!) when I abandoned the relative security and successes of my corporate life as a strategist and risk trader, to start a new business I leaned heavily on a “willing and collaborative” corporate sponsor to help me. While the capital they provided (at a time when VC/Start up investing was nearly non-existent in Europe) alongside my own was certainly super critical, more than anything else it was their willingness to provide service support infrastructure which kept down costs, and my own operational responsibilities light which helped me build a valuable and marketable solution with global growth potential. They also offered an established market position stateside, which complemented my own in Europe, giving me some additional market access which contributed to a successful partnership.  Of course, as I grew relatively successful and started perhaps to create and realize “outsized value” for myself, inevitable conflicts with senior corporate stakeholders did arise and my own “outcome” compromised, but on reflection years later, I came away from the experience of the view that there was a right time, and a right place where a corporate backer for an entrepreneur could work and should be considered.

Now in 2025 I find myself again engaged, this time, playing different roles as advisor, and NED with corporate investors (now alongside established venture capital partners), and thus have an opportunity to once again consider the rewards vs. risks associated with corporate venturer partner, and to reassess the conclusions I came to all those years ago. Of course, on this occasion my own position is vastly different and what is at stake for me personally, far removed from my past, and thus may bias my observations and conclusions, but as I have now amalgamated a variety of interactions and outcomes, I think I am able to draw some insights worth sharing.

As a starting point, I actually was myself a corporate venturing participant into the age of Internet 1.0 and the emergence in the late 90’s of the first way of so called “disruptive” digital distribution businesses and thus was part of an organization that had its own set of rules for investing time, capital and support into true start-ups as well as early and mid-stage businesses.   These rules did not mimic the financial profile that we strictly followed in our M&A activities but rather were developed from a mindset that recognized the potential disruptive nature of the “internet platform” and our own immediate lack of expertise and innovative DNA to allow us to both transform our existing franchises as well as rapidly augment them via the perceived benefits of an entirely new and widely distributed platform. 

Positioned from this perspective, our M&A leadership allowed for corporate venturing to operate with allocated capital with a different investment mindset, i.e. we could be minority owners, with significantly less controlling rights, as well as with different operational rules.  These conditions required us to always have solid business and commercial sponsorship behind us from our “core” and mechanisms to deliver synergies both ways, both in real operational terms as well as contractually. This often meant certain shared IP developed, being able to travel back into the organization, unadulterated, if this was a part of the business case.

All of this made a lot of a sense “when delivered” and usually excited entrepreneurs (in the same way that I had been excited at the start of my own venture back in the day) making them, at least at first, eager to engage.  However, as I began to realize in practice, and as I reflect on my situations that present themselves to me in 2025, there are some quite significant risks, beyond the things that “from time to time” will be lurking innocently in the fine print of a corporate venturing contract that entrepreneurs need to carefully consider.

Risk 1 – “Engagement may not what you think it is”

One of the most significant pluses that corporate venture partners appear to offer is the real opportunity of value creation, both directly as a client, indirectly as a channel partner, and finally, in relation to technology, operational and support service needs, a collaborator.  All of this would seem both obvious and a clear win/win on both sides of the table as deals move from investment to execution, but often the good intentions communicated by the corporate venturing folks is not actually the voice of the organization that has to deliver on these. In fact, it is often the case that the way corporate venturing “sees” the world, and the engagement may run completely counter to those used to operating and controlling how they use their resources, as well as how compensation and a return on investment is realized through their capacity.  This not only leads to frustration on the part of the entrepreneur but usually translates into an overcommitment of resources and energy into something where the engagement process may already be poisoned or as bad, far more nascent, than was expected.   

Risk 2 – “Sponsorship can be fleeting concept when reputations are on the line”

When I have been involved in a corporate venturing deal, especially in recent times, firms have tried to guard against entrepreneur concerns as they relate to “Risk 1” above by identifying the right internal sponsors early on and getting them both aligned and excited.  This accomplishes two things. First, it allows corporate venture to build its own business case for investment, drawing upon both new revenue opportunities and key changes in the underlying operating model that should lead to measurable top and bottom line benefits. Second, it brings the sponsor firmly into the same “sphere” of participation as both themselves and the entrepreneurs, thus building the foundation for transparency, open communication, and a shared vision of objectives.   All of this makes a lot of sense, but unfortunately, disregards the fact that in the corporate world, both areas of responsibilities as well as strategic objectives are often both transactional and transient. As such, what might seem like something that is strong, secure, and “making progress” today, bringing positive feedback and recognition to the sponsor, may in fact quickly be extinguished by a combination of extraneous events, unforeseen speedbumps and personality differences. I have seen changes of this nature happen with destructive effect too many times to ignore them. As such, entrepreneurs should regard a “single” sponsor situation as a significant “key man risk”, no matter what their position may be, and should employ mitigating strategies prior to commitments to counter the impact this could have.

Risk 3 – “Expectations come with two lens”

Corporate venture often brings entrepreneurs into potentially attractive intellectual property, product development, and innovation situations that appear to offer both lucrative business cases for future growth and new avenues into tangential addressable markets that will boost enterprise value.  Investment sourced in this way can also mean domain expertise that would be expensive and hard to acquire can suddenly become both accessible and deeply engaged allowing for the identification of “real” pain points quickly.  In all of the dozen or so venture deals I have been involved in the past decade, almost universally this has been a key consideration of entrepreneurs, especially those seeking to build complex enterprise solutions.  The main “challenge” with realizing these benefits are twofolds. First, is the mobility, or the general lack of it from most corporate sponsors, ill equipped to move at either the speed, or with the reiterative mindset that allows entrepreneurs to accept, learn, and grow from failures in innovation.  This leads to the necessity, on the part of the entrepreneur, to adopt to a two speed model, figuring out in this process how to both meet with expectations and process demands, and yet also make meaningful progress in the broader business.  Second, is corporate myopia which often projects a universal view on their own unique or proprietary situation.  Corporate sponsors can be very convinced and convincing that “they know best”, but the real reality is that their perception of the world is framed by their own environment, and thus often steered by very strong confirmation bias. Entrepreneurs need to be wary of themselves starting to view the world and their own execution through these tinted glasses. To do so, one need the finesse the right level of engagement, being very, very careful to refrain from over promising, over committing, or over charging, all of which will on different occasions become tempting, and ultimately, prove destructive.

Risk 4 – “Venturing is not a natural corporate state of affairs”

While the likes of Google have (I think) demonstrated that a corporate can operate a successful venture program that can co-exist with more traditional venture capital participants, in many cases, the presence of a corporate venturing partner alongside other types of providers creates an unusual governance dynamics.  This is based on the fact that venture capitalists tend to play best when operating with their own specific playbook, rather than one where someone else’s agenda may only partially marry with their own. I have seen this wrongly create the feeling amongst the venture capitalist that the corporate participant will always represent a potential future (and often lucrative) exit, when in fact this transition from investor to owner may either not be desirable or appropriate depending on how the underlying business performs and develops its go to market.  This is particularly true in situations where the strategic direction of the corporate has undergone change, and their desire to retain a long-term committed position may have become compromised.  I have seen this lead to future fund raising challenges for entrepreneurs, as new investors may expect that a corporate venture player, with deeper pockets, and strategic ambitions will more than likely support rather than seek to extract themselves

Risk 5 – “Investment doesn’t mean what you might think it does”

Finally, when it comes to investing capital, the thinking that drives this behaviour from a corporate venturing perspective is often not what an entrepreneur may think.  Back in past times, business service, and software providers often used specific types of commercial models to support innovation as well as deliver some customized outcomes. This were incorporated into service level agreements, as well into advanced funding programs aimed at accelerating the development of intellectual property.  Occasionally corporate clients would manage to create pathways to retain some exclusivity over particular forms of IP, but on the whole, there was little interest that moving from a customer position to a cap table position would alter the way the firm and the vendor would manage their relationship.  The evolution of corporate venturing has of course changed this, and meant that investment is layered, as requested, with a different set of commitments from both the entrepreneur and the company.  These needs often involve companies to commit key resources across different functions to satisfying their corporate venture client, sometimes misaligning operating economics with the investment capital.  Other types of capital providers rarely, if ever, attach this level of commitment as a stated or inferred element of their investment, and thus it often represents a hidden and quite difficult to assess business cost.

One may conclude from the effort I have made to highlight a number of substantive risks that I am against entrepreneurs entering this funding channel, and indeed, many entrepreneurs I have worked with in the past, and work with now, aren’t universally happy about their corporate venture investments.  While I often share this sentiment, the advice I would like to offer in conclusion is a bit different and goes something like this.

1.        Make yourself aware and familiar upfront with the risks that I have described above, and others that may be relevant, in other areas like governance, and reporting, when considering corporate venture funding.  Make sure to discuss these risks openly to enable people to be held accountable for mitigating them both upfront, and as any relationships with different business and functional service units, evolve.

2.        Discount advice that might emerge on corporate venture solutions from advisors who can and do play dual roles with a corporate client.  M&A always represents a lucrative transaction for advisors with their corporate clients and may introduce unconscious biases.

3.        Only consider the idea of corporate venturing capital after you have started to secure a positive, and mutually beneficial relationship with the business itself, and the sponsors who oversea the p/l of that business. Successful commercial relationships with almost all clients do not necessitate capital injection to acquire ownership and thus should be viewed as only a “possible” element of the evolution of a relationship, and never the initiation.

4.        When negotiating with corporate venture, try to make sure you don’t treat or invite them to treat their relationship with yourself based on some “future state”. While it is tempting to see a corporate investor as a “likely” future buyer, or as someone who deserves the right to have that position included in some contractual way, the potential handcuffs this could place on resource allocation, and priority calls isn’t in my view, worth it. In fact, the most ambitious and confidence entrepreneurs don’t want to introduce “back doors” early in their evolution, instead wanting to build their own enterprise value in a completely independent way.

5.        Finally, don’t expect corporate venture to be an operational sponsor if this will be part of the ongoing relationship, and don’t be satisfied with one type of business sponsor to support your ambitions and dual objectives. My recommendation would always be that one needs at least three stakeholders to “buy into” the investment theme, and that these need to be a combination of both fresh and mature perspectives on the partnership and venturing relationship.