There seems to be a lot of corporate players entering the VC space. My cofounders and I see some of them as potential strategic partners for building and scaling our business.
My big concern when it comes to corporate venture arms is the fact that sometimes they put a right of first refusal which really limits your exit scenarios as you can not create a bidding war and drive up momentum on price when a M&A opportunity opens.
From your experience, what are the downsides and perhaps some of the upsides involved in receiving financing from a large corporation?
Its quite possible to negotiate terms such as a right of first refusal provision. The other party may be willing to forgo such a provision if they have opportunity for upside in some other form. Think creatively and negotiate firmly.
In my experience, the upsides outweigh the downside. Having the working capital is one of the pillars of building and growing a successful business. Large corporations may be able to offer resources beyond capital, and can be a gateway to new relationships.
A corporate investor may want to have a active role in your business. The impact of this can be a positive or negative, depending on their approach and/or how you accept it. This is a good issue to understand and establish up front.
The overall experience of the business owner is likely to be far better with the venture unit of a corporation than with a VC. The corporate units are typically seeking acquisition candidates and the VC's profits, all too often at the expense of the entrepreneur.