Corporate Venture Capital: Structuring Concerns for Investors and Startups

Objectives of CVC vs. Pure Venture Capital, Term Sheets, Key Provisions of Investment and Shareholder Agreements

A live 90-minute CLE webinar with interactive Q&A


Wednesday, June 27, 2018 (in 4 days)

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926
Program Materials

This CLE webinar will provide commercial finance and private equity counsel with a review of corporate venture capital (CVC) investments in startups. The panel will discuss the differing objectives of corporate vs. pure venture capital investors and how those objectives are reflected in deal points like management control, sharing of information and technology, and exit strategies. The panel will also discuss the integration and management issues facing startups in accepting corporate venture capital.

Description

CVC has seen unprecedented growth in recent years, with strategic venture investors looking at early-stage companies more than ever before. Direct investment (as opposed to a joint venture or cooperation agreement) gives the corporate investor greater involvement and offers the most significant financial upside. CVC provides a valuable source of financing for technology-focused startups while providing the investor with a new avenue for innovation in its own business.

A strategically motivated CVC investor should pay attention to the conditions under which the investor may gain access to the startup and its technology. If an investment is designed for an exit to the CVC investor or if such a departure is a likely option, both parties should address questions regarding a potential future integration in the shareholders’ agreement.

The fundamental rights and duties of the investor are usually summarized in a term sheet or letter of intent. When dealing with strategically motivated investors, the founders should insist on strict confidentiality undertakings by the company regarding information that will be received in the due diligence process and a non-solicitation obligation of the corporation regarding the startup‘s employees.

The investment agreement contains details of the terms of the investment, negotiation of convertible loans, and financing milestones, among other matters. It also specifies guarantees granted by the founders and the startup and legal consequences in case of a breach. The shareholders’ agreement sets forth the rights and duties of the future co-shareholders.

Listen as our authoritative panel examines the aspects of CVC that distinguish it from traditional venture capital investment, and issues which investors and start-ups should consider before entering into a CVC transaction.

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Outline

  1. CVC vs. pure venture capital
  2. Motivations of CVC: innovation, new technology for existing enterprise
  3. Motivation of a start-up: CVC may offer longer-term financing, expertise
  4. Issues for CVC investor and start-up
    1. Management control
    2. Sharing and ownership of information, intellectual property
    3. Employees: non-poaching concerns
    4. Exit strategy
  5. Process and documentation
    1. Term sheet/letter of intent
    2. Investment agreement
    3. Shareholder agreement

Benefits

The panel will review these and other crucial issues:

  • How to do the objectives of the CVC investor differ from those of the pure venture capital investor?
  • What are some management concerns of the start-up founders in looking at potential CVC investment?
  • How should the parties address the treatment of information and intellectual property after exiting the CVC investment?
  • What are the key documents in a CVC transaction?

Faculty

Dole, Cindy
Cindy L. Dole

Morgan Lewis & Bockius

Cindy L. Dole collaborates with clients at the intersection of technology, intellectual property (IP), and finance. In...  |  Read More

Park, E John
E. John Park

Partner
Morgan Lewis & Bockius

E. John Park focuses his practice on debt and equity offerings, public securities offerings, recapitalizations, and...  |  Read More

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