Ways Corporations are Investing in Startups

So now that you've gone through all the trouble of identifying these promising Blitzscaling startups, you're asking yourself, well, shouldn't I invest in these startups? Shouldn't I take part in their upside? And the answer is absolutely.

But there's a variety of ways in which you can do this. And it's important to remember a couple of key facts around how you do that.

So first of all, one way to invest in startups, quite obviously, is to invest in their equity. But don't just go ahead and start willy nilly writing checks to startups. What you want to do is to establish an investing practice that is going to follow a set of core principles. The first is to always be part of an investment syndicate.

As a company, you're probably not set up to invest in startups. That's not your core activity. On the other hand, here on Sand Hill Road, that is the core activity for these venture capital firms, and they are set up to help the startups to identify the startups. to guide them along the path to success. So instead of saying we're going to come in and we're going to lead the round, instead say we're going to be a part of the syndicate, we'll be a value added investor through all the different forms of partnering that we've previously talked about.

In addition to investing in startups, via the equity route, you can also invest them in a variety of other ways. So for example, if you are the customer of a startup, one of the things that you can do is you can actually pre-pay that startup for the goods or services that you're buying. This is really essential to that startup. It gives them a huge vote of confidence, and it gives them much needed cash to expand. That's a great way to invest in the startup and make it more successful.

You can also invest in a startup by extending them terms. If you're a supplier, perhaps you're selling something to that startup, finance that sale, allow them to defer cash payment, to allow them to grow that much faster. The more you're able to help that startup grow the more you're able to help it succeed, the more you're going to be able to tap into that success.

One of the most powerful things is you can actually combine these different approaches. So you might invest in the startup from an equity perspective, you might become a supplier to the startup and extend them supplier financing, and you might be a customer of the startup and actually prepay them. All of these things can help the startup succeed. And all of these are ways that you can invest in startups.