Corporate Venture Capital in the Consumer Sector during the COVID-19 Pandemic

Corporate partner Mark Pihlstrom gave a webinar on “Corporate Venture Capital in the Consumer Sector” along with CVC managers and directors of Tyson Ventures, Kimberly-Clark, Hormel, Ingredion, and LG Electronics. The panel discussed the latest developments in corporate-backed deals from the consumer sector, in a time when the overall quest for customer-centricity from the past decade may be eclipsed by concerns about the COVID-19 pandemic.

Mark said: “When representing corporate venture-capital clients in new investments in the consumer space, we’ve confronted some interesting rights being granted to important suppliers of the prospective portfolio companies, including exit rights—rights of first refusal or rights of first negotiation in connection with a sale of the portfolio company. Particularly in the U.S., those are some of the important rights that corporate venture-capital looks to get when making up preferred investments. We’ve had to navigate through some of those arrangements and see how we can align those existing rights given to important suppliers with our clients’ wants and needs.”

Regarding existing portfolio companies and the COVID-19 pandemic: “A lot of portfolio companies that didn’t think they needed to do any fundraising, now are absolutely scrambling and turning towards their investors including the CVCs, and are looking to line up bridge financing—convertible-note financings. And given the circumstances and to optimize a return on those convertible-note investments, we’re having to dig a little deeper into those terms because of the very real possibility that there may not be a follow-up financing, or that the portfolio company may not be able to pay back the loan when due. We’ve had to come up and address some real-world scenarios with our portfolio companies who we’re trying to help along, but we also need to be realistic with them.”

Mark concluded that it is important to work “closely with your investors and your board, leaning on them and trying to get as much information out of them as possible to help your business succeed. I have several emerging company clients that are holding weekly board calls to keep everybody updated on progress and to get new thoughts and opinions on a very consistent basis. And finally, it really is making sure the CEO and the leadership of these companies are doing the best they can to view this situation, albeit bad, as an opportunity to try to stay positive for the mental well-being of their workforce, so that we all come out of this ahead in the end, if we plant the right seeds now.”

View the presentation.