As venture capital flows continue to fluctuate, founders have to double their appointments. While it can be tempting to overlook certain terms to close a deal, founders should remember that almost everything in a deal is negotiable.
Many entrepreneurs tend to focus only on the valuation of the company during conversations, but often other clauses in the contract can have much more impact. The problem is that founders in the early stages of their business often don’t want to hire lawyers because of the costs involved, so they don’t have the legal knowledge or experience to get the best deal possible.
But when dealing with corporate venture capital (CVC), where companies have seasoned, dedicated legal teams, founders should begin negotiations with an understanding of the legal dynamics. By doing this, they can be creative with their requests and implement more effective terms for both parties.
Drawing on my legal expertise as head of Wayra X, Telefónica’s investment vehicle, and conversations with founders at the negotiating table, this is my advice for dealing with CVCs.
CVCs also understand startup negotiations
Especially at this point, you should feel like you can still challenge investors’ terms and express your preferences.
It may seem like you’re up against Goliath when trying to negotiate with CVCs, but the size and experience of their legal teams doesn’t automatically give them an advantage. Yes, CVCs are more used to preparing M&A and high-level contracts, but they should be able to change their mindset when working with startups.
That means being able to work efficiently with a smaller team, write contracts in plain language and clearly break down requirements before anything is signed.
CVCs should also not run counter to the broader investment world; their size does not allow them to operate outside of standard processes. So if they present terms that seem out of place in a traditional investor contract, founders can certainly name them. Likewise, if a CVC wants to tie the investment through a commercial deal, you can decline, especially if there is a potential conflict of interest.