Neil Foster explores the outcome of the panel he chaired on deal terms and best practice at the Global Corporate Venturing Symposium in May 2017.

Surely the CVC industry has a standard set of deal terms set out in a consistent term sheet which everyone uses? This is a question that arises over and over when we are putting together term sheets and negotiating deal terms. The answer is no, CVC terms differ from deal to deal. However, best practice is developing and a more standardised set of policies and philosophies are emerging. Term sheets for CVC transactions can look similar on first glance, covering the same broad topics in most cases, but the detail can be crucial. CVCs differ more than VC funds because CVCs invest predominantly for strategic and not financial purposes and each corporation’s strategic objectives differ. This often leaks through into the term sheet. As we will see below, the terms sought can also vary depending on the jurisdiction of the parties and their respective appetites for risk. At the Global Corporate Venturing Symposium in May 2017, Neil Foster chaired a panel on the subject of deal terms and best practice. The outcome of this discussion is explored below. Effect of differing strategies on deal terms As has been well documented, the investment strategy of CVCs is often markedly different from those of their VC counterparts. Unlike VCs, the vast majority of CVCs are less driven by financial returns and more by strategic objectives. As a result CVCs are not necessarily seeking quick exits to make a return. However, while all strategies are different, deal terms can still be aligned. As Keith Gillard, general partner of Pangaea Ventures, whose limited partners in its funds are all corporates, said: “I think the essence of the terms, beyond the process of the negotiation, is alignment. All of us are trying to maximise the success of this company and for me that is the essence of setting the terms. If we co-invest with strategics, which we frequently do, usually we ask that any strategic rights be in a separate side letter. It is a different agreement, it is separate from the investment and it should be treated as such but entered into at the same time. “If you want to make sure that this management team will work hard, they have got to be happy and they have got to be able to get a reward out of this, they have to see a path to an exit. If the strategic partnership terms are such that it will negatively impact the possibility of an…

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