5 minute read | October.30.2025
In today’s dynamic funding environment, strategic investors and corporate venture capital (CVC) arms have become increasingly prominent players in the UK and global startup ecosystem. Unlike traditional financial VCs, strategic investors (often large corporates or their dedicated investment vehicles) bring not only capital but also industry expertise, commercial relationships and access to markets. For startups, partnering with a strategic investor can be transformative, accelerating growth and providing validation. However, these relationships also introduce unique commercial and legal complexities that require careful navigation.
In this instalment we offer guidance for UK founders looking to strategic investors and CVCs for funding and growth.
Strategic investors typically pursue a dual mandate. They seek financial return while also advancing their broader corporate strategy. This may involve gaining early visibility into a technology stack, securing a pipeline for commercial partnerships or positioning for a future acquisition. UK founders should recognise that these goals can evolve as the corporate’s own strategy changes, which means the investor’s engagement model can shift with reorganisations, leadership changes or industry cycles.
Strategic investors will often seek enhanced information rights, including access to periodic reporting, budgets and business plans. This will generally be aligned with the company’s aim to grow and leverage the guidance of the strategic investor across operational matters. However, it is important to remember that strategic investors are likely to operate in similar, and sometimes competitive, sectors.
In deals involving a strategic investor, it is common to see competitive-sensitivity protections. Companies can designate “competitively sensitive information” that may be withheld or provided only in aggregated or time-lagged form. Typical categories include detailed pricing, customer-level data, non-public product roadmaps and benchmarking against competitors.
When a strategic investor is represented on the board (either as a director or an observer), UK founders should consider implementing protocols to manage the flow of sensitive information. One effective approach is to restrict access to certain board materials that contain competitively sensitive information. This can be achieved by preparing two sets of board packs: a complete version for non-strategic directors and a redacted or summarised version for strategic investor representatives. The company secretary or general counsel typically oversees this process, ensuring that only appropriate information is shared in accordance with agreed restrictions.
In addition to restricting board materials, it is common practice to require directors or observers affiliated with a strategic investor to recuse themselves from specific board discussions or decisions where a conflict of interest may arise. For example, if the board is considering a commercial partnership or transaction that directly involves a competitor of the strategic investor, the relevant director or observer should be asked to leave the meeting for that agenda item. This protects both the company and the strategic investor from potential conflicts and the inadvertent sharing of sensitive information.
These protocols should be negotiated from the outset of the relationship and clearly documented in the company’s articles of association and shareholders’ agreement. By formalising these procedures, UK founders can reassure all parties that sensitive information will be handled appropriately, while maintaining the benefits of strategic investor involvement at board level.
Strategic investors often negotiate for specific rights in connection with their investment, which can have a significant influence on the terms and structure of future fundraising rounds. Two of the most common protections sought are pro rata participation rights and anti-dilution protections. These rights and protections are not unusual, even outside the CVC ecosystem, however some strategic investors may negotiate for rights of first refusal or other exit-related provisions, which can impact the company’s flexibility in pursuing an exit or attracting acquisition interest from competitors of the strategic investor.
As the company grows and its shareholder base evolves, founders should periodically review and, where possible, renegotiate these terms to ensure they remain appropriate for the company’s stage and strategy.
When a company receives funding from a strategic investor or CVC, it is common for the parties to enter into parallel commercial arrangements, including co-licensing, co-development or preferred distribution/supplier agreements. While these can create significant value, tying them too tightly to the investment can distort incentives and complicate future financings. A clean structure separates the equity investment from commercial contracts, with each on its own terms, pricing and termination mechanics. Cross-defaults should be avoided or narrowly tailored so that a commercial dispute does not jeopardise the cap table and vice versa.
Navigating the complexities of strategic investment and CVC is a critical challenge for UK founders seeking to accelerate growth and unlock new opportunities. While strategic investors can offer far more than capital — bringing industry expertise, commercial networks and validation — their involvement introduces a unique set of commercial and legal considerations that must be managed with care.
By understanding the motivations of strategic investors, implementing robust protocols around information sharing and board participation, and negotiating investment terms that balance the interests of all stakeholders, founders can harness the benefits of these partnerships while safeguarding their company’s long-term interests. It is essential to approach these relationships with clarity, transparency and a willingness to revisit arrangements as the business evolves.
Orrick's UK Founder Series offers monthly tips for startups on key considerations at each stage of their lifecycle, from incorporating a company through possible exit strategies. The Series is written by members of our market-leading London Technology Companies Group (TCG), with contributions from other practice members. Our Band 1-ranked London TCG team successfully completed over 350 financings and tech M&A transactions in 2023 & 2024 totalling $5B+ and has dominated the European venture capital tech market for over nine years (Pitchbook). View previous series instalments here.