Inside Corporate Innovation

I was sitting in a board meeting for one of our portfolio companies. They needed bridge funding - not a lot, just enough to get to their next milestone. The company was solid, the product worked. As lead investor and board member from our corporate venture fund, I should have been able to help.

But our parent company was being acquired, and we’d been in regulatory limbo for almost a year. No new investments, no follow-ons. The other investors looked to me - if you’re not in, why should we be? Fair question. No good answer.

That's when I understood the gap between corporate innovation programs that mean well and ones that can actually deliver. The gap between what they set out to do and what they can actually deliver often comes down to structural choices that nobody thinks about until it’s too late.

What I’ve Seen Work Differently

I’ve spent decades on both sides of this - running programs inside major enterprises, building a corporate venture fund, sitting on boards watching partnerships help companies and hurt them. The patterns that emerge aren’t about good programs versus bad ones. It’s more subtle than that.

Bezeq: A Different Starting Point

About 25 years ago, I was Chief Architect at Bezeq, Israel’s largest telecom. This was the heyday of telecom startups, and we evaluated technologies constantly. We formed a program for startup collaboration.

Here’s what was unusual: we didn’t demand equity. We didn’t demand exclusivity. We offered startups a testing ground, access to experts, large-scale implementation know-how. That’s it.

Why could we do this? Bezeq was still government-owned. The mindset wasn’t “capture upside” - it was “advance the industry.” Strong culture of excellence, being innovation leaders. We got what we needed through commercial partnerships.

Government bureaucracy gets a bad reputation. But sometimes it protects you from the tyranny of quarterly earnings calls.

Later, when private groups acquired control, priorities shifted. Eventually the program was scrapped. Not because it failed - because the incentives changed.

Clalit: The Power of Internal Navigation

Around 2010, I was advising Clalit Health Services on digital innovation. Telemedicine, online appointments, digital prescriptions. Many services came from startups.

The biggest challenge? Helping startups navigate the organization. Medical compliance, IT department, data integration, security. Without a dedicated team of people who could translate between worlds, the startups would have drowned in process.

But here’s what really made it work: the innovation leader was senior enough to clear obstacles when they appeared. And they always appear. This program is still running successfully today.

PHIL Ventures: The Structural Questions

When we built PHIL Ventures as PETstock’s corporate venture fund, we thought we’d designed it well. Early-stage investments, global reach, active support including board seats. We secured exclusivity in Australia and New Zealand, gave startups access to subject matter experts, offered connections to distribution.

But some structural choices created friction we didn’t anticipate:

We didn’t form a traditional fund with committed capital. Every investment needed board approval. This created a lengthy process that wasn’t ideal for startups. More critically, it also applied to follow-on investments, so companies couldn’t rely on our continuing support.

The early-stage focus meant the parent company had to wait years before seeing practical value. Over time, internal champions lost interest.

When the parent company was acquired, there was a long limbo period during regulatory review. Portfolio companies needed bridge funding. We couldn’t provide it. As lead investor and board member, it was difficult to convince co-investors to participate when we weren’t.

Eventually the acquiring company decided our approach didn’t align with their venture strategy. We folded the fund. Some portfolio companies adapted. Others struggled.

I learned more from that experience than from the ones that went smoothly.

The Risk We Couldn’t Design Around

But there was another lesson from that period - one that no amount of structural planning could prevent.

I sat on the board of a portfolio company that developed a device for veterinary diagnostics. We reached a strategic collaboration with a major US pharma company - they’d co-fund clinical trials, we’d spec the product to their needs.

The whole team focused on that use case. Put everything else on ice. The agreement looked solid.

After the first successful trial, the pharma company was acquired by a PE firm. New CEO killed all R&D initiatives, including ours. The company was left with no cash, a product built for one customer who disappeared, and a difficult path forward.

Corporate M&A risk isn’t theoretical. You can’t control it, can’t see it coming, can’t fully protect against it.

A Question Worth Asking

Here’s something I’ve been thinking about lately: many corporates can achieve their innovation objectives without the equity game at all.

Look at Bezeq. No equity. No board seats. Just being a thoughtful commercial partner, offering resources, connecting startups with experts. The value to the business came from early access to technology and the ability to shape products we might actually use.

Or Clalit. They partnered with startups as customers. Built infrastructure to make those partnerships work. Got the strategic value they needed without cap tables and term sheets.

So why do many corporates insist on taking equity? Sometimes I think it’s about being close to the action. But you can build meaningful relationships with startups through thoughtful commercial partnerships. Procurement fast-tracks. Dedicated teams that shield them from bureaucracy. Early customer commitments. Access to distribution.

And here’s something founders should consider: having certain strategic investors on your cap table can complicate your future. Exit paths narrow. Competitors of your strategic partner become reluctant to consider acquisition - why buy a company where their competitor has board visibility and maybe rights of first refusal?

The strategic investor who was supposed to open doors? They just closed half of them.

I’ve watched this play out. Good companies that became harder to sell because of who was on the cap table.

What Seems to Matter

Looking across these experiences, a few things stand out - not as rules, but as patterns:

The programs that worked had long-term thinking backed by actual structure. Not just executives saying “we think long-term.” The thinking showed up in how the program was built. Ownership structure mattered. Governance mattered. Whether capital was committed or required repeated approval mattered.

Clear value beyond capital made a difference. If the main value proposition was money, traditional VCs were usually better partners. But access to customers, distribution channels, domain expertise - when that was real and accessible, it could be transformative.

Senior people who could clear obstacles were essential. Not just coordinate meetings. Actually make things happen when the inevitable friction appeared. But bear in mind that people tend to move in big organizations – up, down and sideways. What happens when your champion isn’t there?

And realistic expectations about timing. Early-stage companies take years. If the corporate needed results in 12-18 months, someone eventually asked “what are we getting from this?” and didn’t like the answer.

What I Ask Now

When I’m advising founders considering corporate partnerships, I’ve learned to ask different questions than I used to.

Not “how much capital are they offering?” but “what happens to this relationship when their priorities shift?”

Not just “what’s the strategic value?” but “can you achieve your objectives without them on your cap table?” and “What if we just form a commercial partnership?”

“What happens to our relationship if they get acquired?” Have that conversation explicitly. Get contractual protections where possible.

“How will having them on our cap table affect conversations with their competitors?” Sometimes the validation you’re seeking becomes the very thing that limits your options later.

The specifics matter less than the exercise. You're forcing yourself to think through the structural realities before you're locked in. And if their answers don't satisfy you - if they can't articulate what happens when things change, if they're vague about who can clear obstacles, if they need equity but can't explain the strategic value beyond capital - that's information. Sometimes the clearest signal is what they can't answer.

The Messy Reality

Corporate partnerships aren’t inherently good or bad. They’re complex. The same structural choices that make sense for the corporate - board approval for capital allocation, strategic oversight, integration with core business - can create impossible constraints for startups.

I still work with corporates. I still help founders navigate these decisions. But I’ve learned that the structure matters more than the good intentions. The governance matters more than the promises. And sometimes the best partnership is the one where nobody’s trying to own a piece of you.

I help founders navigate strategy and funding decisions when the path isn’t clear.

If you’re there, let’s talk.