Corporate VC Requirements of Founders

Corporate VC Requirements of Founders

June 8, 2021 by investor

Startups looking to take corporate VC funding should be aware of the requirements put on founders.

Here’s a list to consider:

– Corporate VCs may seek consent rights on contracts the startup enters with competitors.
– They may seek higher levels of compliance on the part of the startup.
– They may require additional rights over an exit, given they are in the deal for a longer time.
– They may limit the information made available to competitors and the market in general.
– They may expect right-of-first-refusal on any shares offered.
– They may put a call option on the company for a future buyout.
– They may put a put option on the company which must buy back the shares in the future.
– They may take a board observer role which absolves them of any fiduciary responsibility.
– They may require the startup to comply with ESG, environmental, social, and governance compliance.

There’s a cost of working in the large company world, so it’s important to understand the requirements that come with the funding.

 

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Hall T Martin is the director of Investor Connect, which is a 501(c)(3) nonprofit dedicated to the education of investors for early-stage funding. All opinions expressed by Hall and podcast guests are solely their own opinions and do not reflect the opinion of Investor Connect. This podcast is for informational purposes only and should not be relied upon for the basis of investment decisions.

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