How To Raise Corporate Venture Capital

By Nathan Beckord

If you can remember back as far as I can, you might remember the good old days of raising capital. You’d load up your 10-slide pitch deck and visit numerous two- or four-story buildings on Palo Alto’s Sand Hill Road, hitting multiple potential investors in one day.

That’s how it was for Sterling Pratz’s first venture, Autonet Mobile. But as times have changed, Sterling takes another tack when pitching investors today. Not only does he craft pitches differently, but he approaches different targets: strategic investors.

With his latest venture, Car IQ, Sterling wants to simplify transactions around the “big five” for cars: fuel, tolls, parking, service, and maintenance. Car IQ currently works with fleet vehicles to prove product-market fit, as they have the greatest need for transactional efficiency. For example, instead of each driver needing a company credit card, the car could pay for its gas.

This time, rather than knocking on traditional VC firms’ doors, Sterling has found greater synergy working with strategic investors and corporate VC—companies that benefit most from Car IQ’s advances. The company’s strategic investors, like State Farm, Visa, Circle K, and Avanta Ventures, know the value of automotive-driven data and how to use it.

Having funded his own prototype with Car lQ co-founder Sagar Apte, and after raising a seed round, Series A, and Series B, Sterling has plenty of advice for founders looking to raise with corporate VC.

In this article, Sterling and I take a trip down memory lane, recalling raises past and discussing what’s changed. We also talk about how Car IQ works with strategic investors, and he shares his top tips for pitching today.

The changing fundraising landscape: pitching to corporate VCs

Sterling and I go way back. I was with him when he raised for AutoNet. At the time (pre-2008, pre-iPhone), we relied on standard pitch decks for most of our pilgrimages to Sand Hill Road. Now, after a successful exit from AutoNet, Sterling has a more effective way to pique investors’ interest. Here are the steps he uses today.

1. Give them the “movie trailer”

Many startups still use the standard 10-slide deck, and there’s nothing wrong with that. But Sterling likes to break it down into even smaller bites.

Build the first pitch as if you’re creating a movie trailer. Sterling recommends no more than three or four slides; the total pitch time should be four to six minutes. Like a movie trailer, you’re telling a story—from the customer’s perspective. This approach gives the investor an experience, not just a presentation, and helps them digest your offering.

2. Put yourself in a box

Set this goal for that first meeting as well. If your product fits into more than one category, clarify which category is most relevant for that investor. For example, Car IQ could fit into fintech, automotive, or telematics.

A clear category is critical in Zoom pitching, where an investor is less likely to interrupt you to ask for more detail than they would in person. Get your own story straight so they don’t have to.

“Every entrepreneur’s challenge is how to succinctly tell their story so [investors] know what box to put you in,” Sterling explains. “If you don’t do it right, the venture capitalist sitting across the table will spend all their time scanning for what box you fit in, and they’ll miss the importance of what you’re doing.”

3. Provide more detail

If the investor likes what they see and wants to hear more about your startup, you can give a more detailed pitch. Sterling says, “If they really like that, you come back with more of a partner meeting. That’s when you get into a more technical approach.”

In that meeting, you can give your financials, as well as more information about your product or tech—and research on your competition.

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How to work with strategic investors and corporate VC

Sterling sees a significant advantage to pitching strategic investors or corporate VC over traditional venture capital. Strategic investors are already intimately familiar with the challenges of your industry because they’re in the same one. You don’t have to explain the problem to show the solution’s value. With traditional venture capital firms, getting them to understand your industry and its unique problems can be half the battle.

There’s also a balancing act that goes along with working with multiple strategic investors. Sterling hasn’t had anyone ask for an exclusive in their term sheet. In other words, Circle K hasn’t mandated that Car IQ can’t work with any other convenience store chain. “[Strategic investors] tend to be very good about not only not putting a bear hug on you but also about not asking for confidential information from competitors. There’s definitely a wall there. It makes my job easier at a board meeting level,” he says.

But while strategic investors are motivated, they might need more time to move a project forward. Often, they know they need to be in a particular space, but they might only be there to learn from you—and test a few ideas—at first. Sterling recommends being open with strategies and simply asking them where they stand. On top of that, he looks to the customer first, letting client demands decide which projects get done.

Here are four additional tips from Sterling on how to work with corporate VC:

1. Check your alignment

Will you help them grow and vice versa? Are you and the strategic investor working toward the same goals? It’s important not to force a fit where there is none. If they’re going in a different direction than you planned, it’s okay to walk away. But if everyone’s compass points in the same direction, see where your paths overlap.

“You have to make sure you’re aligned with the challenges or the areas they want to grow,” Sterling says. “Growth is really important to strategy, not just fixing a problem.”

2. Make sure you’re talking to the right people

It might seem obvious, but often the venture arm of a company has a different focus than the company itself. Set your meeting with the venture folks, not just the corporate players. The goals of the venture arm are typically more growth-minded than operational.

3. Solve their problem

Your company might be able to solve myriad problems, but when you’re meeting with a strategic investor, focus on their specific situation.

“Don’t try to boil the ocean,” Sterling says. “Focus on them. Let them dive in deeply. Let them understand how this helps them with their company, and let them come along on their own terms. Don’t try to force them.”

4. Keep an open mind

Sometimes a strategic investor meets with you to get ideas. That can feel threatening, particularly if their company is considering a project similar to yours. Sterling advises not to get your hackles up just yet.

“I did have one major strategic [investor] who came in saying, ‘I just want to learn about the market.’ They said, ‘We may build our own, or we may use you; we don’t know.’ Their openness encouraged me to just be open with them,” he says. “And lo and behold, they became an investor.”

Treat every meeting as a potential investor, and you won’t miss out on big opportunities.

Don’t oversell yourself to investors

It’s tempting to promise 50 people 50 different things when trying to get funded. If Sterling could give his younger self one piece of advice, it would be this: “Don’t oversell your business when you’re talking to VC. Just let them know what you’re doing.”

He also says to understand why you’re doing what you’re doing, not just what you’re doing. There’s a subtle difference, but the distinction is important. The why keeps you from driving into the weeds and focuses your journey so you can find the very best support for your success.

Article is based on an interview between Nathan Beckord and Sterling Pratz on an episode of Foundersuite’s How I Raised It

About the Author

Nathan Beckord is the CEO of Foundersuite.com, which makes software for startups raising capital. Nathan is also the CEO of Fundingstack.com, which is a new platform for VCs and investment bankers to both raise capital and assist clients and portfolio companies. Users of these platforms have raised over $9.7 billion since 2016.

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