Corporate Partnerships

Competitions:

Competitions include a wide range of challenges or contests inviting individuals, teams, or organisations to submit innovative ideas, solutions, or technologies to solve specific problems.

These challenges can have either a global or local focus. The format ranges from submitting proposals via an online platform to participating in pitching competitions and hackathons. Corporations frequently manage competitions by engaging an innovation platform company (such as Wazuko or Agorize) or collaborating with innovation hubs and ecosystem facilitators.

Incubators and accelerators:

• An incubator is a programme or organisation that supports the initial development of startup companies by providing essential resources.
• An accelerator is a programme or organisation that offers resources to early-stage startups to help them grow and succeed in the market.

Corporations may run incubators and accelerators internally or participate as partners in external programmes. Around 75% of Fortune 100 companies are involved in such initiatives, although their effectiveness varies. These programmes offer startups targeted support and resources, depending on their stage of development:

• Funding: Through grants or equity-based investments.
• Training and mentorship: Incubators and accelerators typically follow a cohort-based model and offer entrepreneurship training. Programmes specific to medical technology startups provide industry-specific training and knowledge, which can be game-changing for founders without industry experience.
• Resources: Access to maintained, accredited, or certified office/lab space and rare resources such as data, samples, manufacturing facilities, reagents, materials, or IP rights.
• Networking opportunities: Through the corporation’s partner network.

For more advanced startups, research or co-development agreements may be more appropriate than competitions, incubators, or accelerators. Startups active in research or development can accelerate timelines by leveraging corporate resources and expertise. These collaborations can drive innovation that neither party could achieve alone.

R&D partnerships range from short-term feasibility studies to multi-year projects, focusing on new technologies, device development, process improvements, or novel applications.

Research Collaboration Agreements (RCAs) are non-commercial contracts where two or more parties collaborate on early research. Intellectual property (IP) ownership and commercialisation rights are negotiated case by case. RCAs are common between industry and universities, research institutions, healthcare providers, or early-stage startups focused on disruptive technologies. Consortium-based R&D agreements are similar but involve multiple stakeholders and can help access government grants, such as EU or NIH funding.

Sponsored Research Agreements (SRAs) involve one party, typically a company, funding R&D by another, usually a university, research institute, or smaller company. They are often used to support fundamental research or feasibility studies. The sponsor may receive exclusive or non-exclusive IP rights.

Clinical Trial Collaboration Agreements (CTCAs) support joint clinical investigations between startups and corporations. Startups benefit from corporate resources, expertise, and patient access. These agreements define each party’s roles in conducting trials, ensuring compliance, sharing data, and managing publication.

Co-development agreements usually cover later-stage technologies wherein partners share expertise, resources, and risks to develop a product collaboratively. A co-development agreement enables companies to retain their independence while functioning within a contractual framework that specifies the management of intellectual property (IP), milestones, and commercialisation rights. The parties agree on the distribution of costs, regulatory and payer submissions, and potential revenues. Typically, the scope is limited to development, but it is often followed by manufacturing or commercialisation agreements if the project is successful. Co-development agreements that involve establishing a new legal entity are called Joint Ventures (JVs).

Manufacturing or supply agreements are close, long-term partnerships. Establishing a solid working relationship and setting expectations and terms from the outset is essential. They are also complex agreements addressing many interrelated potential issues. Due to their possible impact on the business, these agreements often draw considerable scrutiny from corporate partners.

Manufacturing Agreements:

A manufacturing agreement is a legal contract between a manufacturer and a client that outlines the terms for producing goods, including specifications, pricing, timelines, quality standards, and ownership rights. This agreement is required if a corporation intends to manufacture a medical device on behalf of another company. Corporations often have well-established, certified manufacturing facilities and supply chain networks that startups can harness for rapid scaling.

A manufacturing agreement for medical devices is typically started once the product design is finalised, regulatory requirements are defined, and both parties have agreed on production terms, ensuring compliance. The agreement should be in place as part of design transfer activities.

A contract development and manufacturing agreement is used when a company engages an external partner to develop and manufacture a product. These agreements concentrate on technical development and production. They may involve two medical device companies of similar or varying sizes, a medical device manufacturer, and an external Contract Development and Manufacturing Organisation (CDMO). Retaining the same partner for both development and manufacturing helps streamline design and development and smooth design transfer to manufacturing.

Supply Agreements:

A supply agreement is a legally binding contract that outlines the terms and conditions under which a supplier provides goods or services to a buyer. It should include pricing, delivery, quality standards, and payment terms. Depending on the product’s purpose, supply agreements can occur at any stage of the product lifecycle. Startups with innovative materials or manufacturing processes often benefit from supplying their proprietary technology to other companies.

Distribution and marketing partnerships involve agreements whereby one company manages the marketing and sales of another company’s products. A distribution partnership focuses on getting products to market, while a marketing agreement focuses on raising awareness and driving demand for the product.

These partnerships are not solely the domain of startups and corporates; they occur between companies of all sizes. Such agreements are also suitable for collaborations involving services that may enhance another company’s portfolio.

Corporations can assist smaller companies in gaining access to established distribution networks and marketing resources to reach a broader customer base. In return, the partner company’s products may address a gap in the corporation’s existing portfolio or enable it to penetrate a new market.

Most marketing and distribution agreements are negotiated towards the conclusion of the design and development phase, once the product has secured at least one regulatory approval, or during the market access phase. A well-structured marketing and distribution agreement can significantly expedite a medical device startup’s commercialisation success. However, thorough due diligence ensures the partnership aligns with your business objectives and long-term vision.

Distribution partnerships:

A distribution partnership involves delivering and selling products to end customers. The distributor manages logistics, inventory, and sales, often taking ownership for resale at a markup. The agreements are long-term, as they focus on ensuring the product reaches the market efficiently and consistently. The terms should delineate marketing strategies, pricing structures, distribution territories, performance targets and regulatory compliance requirements.

Marketing Agreements:

A marketing agreement focuses on promoting products or services to raise awareness and drive demand. The marketing partner manages strategies, campaigns, and sometimes customer engagement but typically does not handle distribution. Compensation is often performance-based, such as commissions on sales or flat fees, with agreements usually tied to short-term or campaign-specific goals.

Licensing agreements involve the transfer of intellectual property (IP) rights from one party (licensor) to another (licensee) in exchange for royalties, fees, or other considerations. Most forms of IP can be licensed, including patents, trademarks, trade secrets, copyrights, technology, and business or brand.

Licensing agreements can be brokered at any stage of the product lifecycle and vary by:

• Terms of use: The right to use, sell, or distribute certain intellectual property assets in exchange for compensation.
• Exclusivity: Licenses may be exclusive (granting rights solely to one licensee) or non-exclusive (allowing the licensor to grant licenses to multiple licensees).
• Scope of the license: This includes the geographic territory, field of use, or license duration.

The financial considerations paid in exchange for IP rights may include:

• Upfront Fees: A one-time, non-refundable payment made at the start of the licensing agreement.
• Milestone Payments: Payments triggered by specific R&D, regulatory, or commercial milestones help balance risk between the parties.
• Royalties: Ongoing payments made by the licensee to the licensor in exchange for the right to use the IP:
• Percentage-Based Royalties (Revenue or Profit-Based): The licensee pays a percentage of gross revenue, net revenue, or net profits.
• Fixed Per-Unit Royalties: A set fee per product sold, regardless of the sales price.
• Milestone-Based Payments: Payments triggered by achieving specific development or commercialisation milestones.
• Minimum Annual Royalties (MARs): A guaranteed minimum payment per year, even if sales are low. This prevents licensees from holding onto valuable IP without commercialising it.
• Equity-Based Compensation: Instead of (or in addition to) cash payments, the licensor may receive equity in the licensee company. This is common when licensing to startups.
• In-Kind Considerations: In co-development deals, the licensee may cover R&D costs instead of (or alongside) paying traditional royalties.
• Option agreements: Grant a corporation the right to license or acquire technology from a startup within a specified timeframe and under predetermined terms. These agreements allow licensees to assess the technology and its market potential before fully committing.

Corporate Venture Investing (CVI) refers to an established company’s investment in startups or early-stage firms to achieve strategic and financial benefits.

Corporate venture investing is usually managed through corporate venture organisations. Most large medical device, pharmaceutical, or healthcare companies have corporate venture arms that invest in startups with:

• Disruptive technology aligned with the corporation’s long-term objectives
• Opportunities to expand into new markets or business models
• Potential acquisition targets

CVI differs from traditional VC because its goal encompasses financial returns and strategic alignment with the corporation’s core operations. Corporate venture organisations typically invest longer than traditional VC (5-10 years), which can be an advantage for medical device startups. However, their risk appetite is generally lower. The exit strategy often entails a long-term partnership, licensing, or mergers and acquisitions (M&A). If structured properly, a corporate venture investment can be transformative. The key is ensuring that the partnership promotes growth while maintaining strategic flexibility.

These organisations vary widely regarding risk appetite, strategic alignment, and integration within the existing business. Some operate similarly to traditional venture capital (VC) but with a more strategic focus. Some make minority investments, allowing the corporation to invest in a start-up while keeping the option to acquire it later. Convertible Notes and SAFE Agreements enable corporations to provide convertible debt instead of purchasing shares upfront, turning into equity later when valuations are uncertain.

M&A consolidates companies or assets through financial transactions. One company merges with or acquires another. A merger occurs when two companies combine to form a single entity, often to create synergies and enhance competitive positioning. Different types of mergers include:

• Horizontal Merger: Two companies within the same industry and market segment merge to diminish competition.
• Vertical Merger: A company merges with a supplier or distributor to gain greater control over the supply chain.
• Conglomerate Merger: Companies from unrelated industries merge to diversify risk. An acquisition occurs when one company purchases another or its assets to integrate or operate it as a separate entity. Acquisitions can include:
• Stock Purchase: Gaining full ownership or a majority stake in another company. A hostile takeover happens when a company buys a controlling stake without the target company’s approval.
• Asset Purchase: Acquiring specific assets (e.g., IP, technology, product lines) instead of purchasing the entire company.

M&A can be an attractive exit strategy for startups, offering substantial financial returns. However, it is a high-stakes process requiring clear communication, effective integration, and robust financial and legal expertise. Cultural differences, regulatory compliance, and post-deal restructuring can present significant challenges. Addressing stakeholder concerns and ensuring smooth post-merger integration are crucial to maintaining the transaction’s value.

A well-prepared startup that understands the key drivers of corporate M&A can improve its chances of a successful acquisition while maximising value. Considering factors such as strategic fit, financial readiness, and integration planning enhances attractiveness and ensures a smoother exit process.