Instead of a large upfront equity investment, strategic partners can use warrants. This gives the corporation the option to earn equity later if the startup achieves specific milestones, often through their joint partnership. This approach de-risks the initial investment and directly rewards successful collaboration.
Related Insights
For projects requiring hundreds of millions, fundraising should be split into phases. The initial "pre-industrialization" phase, focused on proving technology, is suited for venture capital. Later phases for manufacturing and scaling should target project finance structures with debt/equity combinations and strategic partners.
Serial acquirer Lifco improves post-acquisition performance by having sellers retain an ownership stake in their business. This goes beyond typical earn-outs, keeping the founder's expertise and incentives aligned with the parent company for long-term growth, rather than just hitting short-term targets.
Don't default to a 50/50 split on day one. Instead, agree to formally discuss equity only after reaching a predefined milestone, like $10,000 in revenue. This allows you to base the split on demonstrated contribution and commitment, avoiding the resentment from premature, misaligned agreements.
Oshkosh structures partnerships to own IP developed jointly with a startup, then licenses it back. This approach, outlined in the initial NDA, gives the large corporation control over patent defense while providing the startup with usage rights, often with market-specific limitations.
To encourage adoption of tech benefiting multiple business units, Oshkosh's CVC arm uses a central budget to fund initial proofs of concept. This removes the "who pays?" friction, as no single department has to bear the initial cost for a company-wide benefit, with the successful unit paying later.
Temasek's partnership philosophy is not about risk diversification. Instead, it prioritizes collaborating with partners who can augment its internal capabilities and provide specific skill sets it lacks for a given opportunity. This makes partnership a strategic tool for capability building, not just capital sharing.
To overcome fierce competition in seed rounds, Offline Ventures allocates 20% of its fund to an internal studio. This capital pays for incubating ideas, which, if successful, result in the fund owning ~33% of the company, compared to the typical ~10% from a standard investment.
Granting a full co-founder 50% equity is a massive, often regrettable, early decision. A better model is to bring on a 'partner' with a smaller, vested equity stake (e.g., 10%). This provides accountability and complementary skills without sacrificing majority ownership and control.
Oshkosh evolved its corporate venture capital from focusing on financial returns to prioritizing strategic innovation. This "CVC 2.0" approach emphasizes direct partnerships and technology integration to supplement in-house R&D, making innovation the primary goal, though financial returns are still a factor.