Your Startup Needs Corp Dev
Veena Ramaswamy, Head of Corporate Development at Lemonade (former VP of Strategy and Corporate Development at CommonBond)
Most early to growth-stage companies don’t have a corporate development (“corp dev”) function. Instead, they have an ad hoc process that activates when company execs receive inbound opportunities. More often than not, nothing materializes from these conversations. The business and its executives are focused on organic growth (rightfully so) and most founders would scoff at the idea of buying another company’s tech when they could build something better in-house.
But, done right, corp dev can be a growth stage company’s secret weapon. Having a way to process inbounds and to proactively seek opportunities can help accelerate growth towards the business’ vision. To create an effective corporate development function for your high-growth startup, there are a few critical steps you should take:
1. Get to really know the business
In order to think ahead, you need to first understand the business — the vision, the products (current and on the roadmap), the target customer, and, importantly, how the business makes money. This can be through engaging with key stakeholders, as well as rolling up your sleeves and being an operator.
When I first joined CommonBond (my previous company before I joined Lemonade), my role was launching new products — rallying folks around the table across product, tech, marketing, cap markets, risk, finance, operations, and legal. This, I found, was the best way to get to know how the business actually worked — to know at the most granular level how the product works, as well as how to make everyone work towards a common goal. This sets you up for learning how new products or businesses would or could fit into the overall vision and how any potential integration could work (and who you need on your side to make sure it does).
2. Establish a corp dev process and continually optimize
Proactively establishing a corp dev process and becoming the point person is critical for not distracting the day-to-day operations of the company, while still pursuing potential opportunities that can accelerate company objectives. The process should account for:
- Managing inbound opportunities including roles, responsibilities, and a standardized process to evaluate the value of the opportunity
- Assessing proactive opportunities and sourcing by making sure you’re in the flow of information within key industry players
- And in both cases of inbounds or proactive opportunities, understanding the value of quickly digging into an opportunity and getting to “is there a ‘there’ there” — answering questions like, who’s the team? what’s the actual product? what’s the business model? what is unique? what would this bring us? (and clearly being able to articulate and quantify is key). And if you find something of interest, leading a build/buy/partner evaluation.
At CommonBond, when we were raising our Series D, we started receiving many inbounds from startups asking us to consider buying them as we grew and scaled our own business. It was important to respond, as there might be something valuable to our business. With a high growth business and many moving pieces, the value add for this organizing function and role is to be the one central node for all such inbounds, and succinctly evaluate and synthesize opportunities, and its potential impact on the business. Or more succinctly, “why this business?” and “why now?” (before getting into pricing, and any potential negotiating).
3. Become an information hub
In a world where everyone is inundated daily with multiple newsletters, breaking news alerts, and thought pieces that are too long to read, a centralizing mechanism in corp dev can be helpful to distill what’s actually important. It’s important to stay on top of industry trends, thought leadership, companies getting funded (and not just the news headlines, but to dig into what their businesses are, who they serve, how they make money). But even more important is to share your synthesis of them– this is helpful to keep others informed and gauge immediate feedback. Also establishing relationships with folks in the ecosystem helps as well, including your own company’s executives, board members, VCs, founders, bankers, and lawyers.
4. Realize (and help others realize) that not every opportunity will be a deal
Finally, and perhaps most importantly, one of the critical parts of a corp dev function or team is to have the mentality of “not everything is a deal” — and not letting that discourage you. In fact, I think the opportunities I have learned arguably more from are those that didn’t culminate into an actual acquisition. It just adds another rep under your belt and deepens your experience and perspectives for future deals.
