Founders talk about their experience with corporate venture capital

Three founders who have taken on corporate venture capital explain what made them partner with an enterprise business as opposed to going down the conventional VC route

Corporate venture capital can be an incredibly helpful way to raise Seed and Series A funding for founders. Having a large corporate behind you can open doors to contacts and to the market.

On the other hand, if you are a disruptor, maybe accepting investment from an incumbent in the very sector you are trying to disrupt might not be the best fit.

Another downside is you accept corporate venture capital can be to scare off other investors, who worry about founders giving away too much equity to a CVC and being perceived as a “soft target” for acquisition on the cheap by the corporate entity.

Growth Business talked to three startup founders who have gone down the corporate venture capital route, asking them what their experience was like and what advice would they have for other founders considering CVC over regular venture capital?

Angus Webb, CEO and founder of Dynamon

Angus Webb founded commercial transport optimisation software startup Dynamon in 2013 as a spinout from the University of Southampton.

An academic engineer by training, Dynamon built on the work Webb did using data to enhance the performance of Team GB ahead of the London 2012 Summer Olympics.

Dynamon optimises data for the commercial transport industry when it comes to electric vehicle adoption. The Southampton-based startup calculates the most cost-effective way for a fleet or logistics business to go electric, whether that’s installing charging points or how much it pays for energy.

Webb initially raised money through tax-efficient SEIS and EIS funding schemes before BP Ventures, the venture capital arm of the energy giant, invested £4 million Series A in the company in August 2023.

BP Ventures announced this week that it expects to invest $200 million in ten to twelve green technology startups this year alone.

BP was already a customer of Dynamon through its BP Pulse, its electric charging point arm.

“It was during that process that they saw what we were doing was unique and had a global potential,” says Webb.

One thing founders do need to be aware of is that, by nature and being part of a larger, risk-averse business, corporate venture capital is cautious and slow to close compared to arranging regular venture capital. BP Ventures’ investment, for example, took 18 months to finalise, as the energy giant had to be meticulous about protecting its brand when backing a startup.

Webb says: “The due diligence process was extremely thorough. We knew that it was going to be. In practical terms, this meant lots of compliance checking, from something as basic as health and safety, bringing us up to a corporate level of compliance, which meant we had to up our game as well.”

Webb says it was important that BP Ventures did not have exclusivity as an investor. Although BP’s corporate venture arm is always welcome to reinvest, he stresses, there is nothing to stop Dynamon working with other VCs further down the line in later fundraising rounds.

Webb says that although the term corporate venture capital is used in the UK, a more accurate term might be strategic investment.

“For us, BP Ventures had an aligned interest in the success of what we’re doing,” says Webb. “A strategic investor can bring access to the market and expertise. as a technology company, BP Ventures aligned very well with the work we were doing anyway with BP.”

Justus Brown, founder and CEO Acre

Like most good ideas, for Justus Brown the inspiration behind mortgage software platform Acre came from his own (bad) experience.

The American software engineer and venture capitalist spent seven fraught months trying to buy a house in France, which even then took years to finally complete, while the transaction costs ended up eating 9 per cent of the purchase price. There had to be a better way, he decided.

What he came up with was Acre, an all-in-one mortgage platform for brokers and their clients.

Brown, originally from America, studied at Stanford and worked on Wall Street before moving to London where he became chief product officer at startup studio Founders Factory. His job was to build a dozen startups from scratch each year working with corporate partners including L’Oreal, EasyJet and Aviva.

Because mortgage brokers control 85 per cent of the market, Brown thought there had to be a way to speed up and simplify mortgage broking. He approached insurance giant Aviva with his idea.

Brown says: “Through working with a corporate, somebody lifted the hood for me, allowing me to see how this part of the market works. Being able to talk to a corporate in this way can help pinpoint where the holes are in a market.

“It was a great example where the corporate can help you figure out if you want to disrupt or innovate and do something better. Corporate partnership enables you to build on existing market mechanics.”

Another advantage of working with corporate venture capital, says Brown, is that the corporate parent can introduce you to others in the market, so you are seen as more of an insider.

Brown continued developing the idea of Acre over the course of 2018 and Aviva Ventures climbed onboard in September 2018, leading a £5 million seed funding round but more importantly providing a channel to market Acre’s software.

Explains Brown: “As a start-up, of course you need an idea, you need money and you need people, but you also need some way to sell the software. My background was in systems engineering and software development, not necessarily in sales. Being able to have a way to market through Aviva kind of primed the pump of us, which was very valuable.”

Advice for founders

So, what advice would Brown have for other founders thinking of going down the corporate venture capital route?

The two key questions any founder must ask about corporate venture capital are, he says, what do I want to get out of this relationship, and how will it help achieve market access to get that first customer and build your market credibility?

Market access is a trump card that corporate venture capital can definitely play compared to a conventional VC, agree founders.

However, a downside of corporate venture capital is that investment can take a long time to close and, over corporate personnel can change over the course of months. The cheerleader who was so enthusiastic about your startup may have moved on by the time the deal closes.

Another anchor is speed of execution: while the startup mantra has often been called “fail fast and fail often” or “break things quickly”, the mission statement for a corporate might be “never fail”.

Brown says that the whole point of a corporate is to provide stability and predictability and be cautious, which can mean things move at a glacial pace.

Says Brown: “The startup mentality is kind of opposite to what a corporate is designed to do.”

Brown’s advice for any founder considering going down the corporate venture capital route is to stay independent enough so that you can remain nimble, while benefiting from the deep pockets and market access which a corporate can bring.

The biggest positive for working with a corporate is that, as UK investors are more conservative than US counterparts, it makes fundraising harder. Having a corporate investor onboard defangs the problem.

Says Brown: “It’s about aligning interests and making sure that you understand what you’re getting into. It’s great to have a corporate onboard with a ready chequebook and that big set of resources it can bring, providing you manage the process well.”

Zoe Bucknell, founder Kuberno

Former financial services lawyer Zoe Bucknell had the idea for the Kube platform having seen the way digital platforms such as Salesforce had transformed sales and marketing.

She saw a gap in the market for what she calls an entity governance platform – a corporate analytics tool drilling down into the global footprint of global enterprises, each with their family tree of subsidiaries, their own boards and governance structures, all of which is crucial for external finance, legal and HR teams.

Bucknell, who worked as a corporate lawyer in financial services for 17 years, bootstrapped Kuberno for the first three years following its launch in September 2021.

Her first port of call for raising seed funding were conventional VCs, who, she says, promised access to the market; however, it became apparent that this was so much talk. “We were struggling to see how much additional value the general VCs were offering to us,” she says.

Bucknell says: “One of the joys of being bootstrapped is that we are very lean. We’re already revenue generating and keep tight control of costs. What we have refused to be on a conveyor built of raising cash and then find ourselves spinning on a hamster wheel of raising capital.”

Because corporate governance is a small world, Kuberno got on the radar of US exchange Nasdaq, which invested £3.5 million in a Series A round in April this year.

Says Bucknell: “Nasdaq was following our journey quite closely because entity governance provides an additional missing string to their bow.”

Like other founders who have gone down the corporate venture capital route, Bucknell was attracted to Nasdaq because of the access to market it offered.

Bucknell says: “We realised that the speed of growth we wanted, we just couldn’t support doing it all ourselves as a bootstrapped company. The other factor was that having the trusted Nasdaq brand behind us meant we could access the US market.”

However, as other founders have noted when taking on CVC investment, the due diligence process is thorough. For Kuberno, the due diligence process took six months.

On the other hand, having Nasdaq onboard has not deterred other investors. Bucknell says that several VCs contacted her wanting to co-invest once the Nasdaq deal was announced.

For Bucknell, the decision to go down the CVC route depends on what market they offer that you want to get access to. “Having the Nasdaq name behind us opened doors straight way because people trusted it,” she says.

Related Topics

Corporate venture capital