I’m often asked whether or not a company should take an investment from a Corporate Venture Capital (CVC) group, and when is the right time. My advice to CEOs is to always identify the best investors that will help you the most for the stage of your company — regardless if they are CVC or institutional investors. This is generally the same process you go through when choosing any investor, CVCs aren’t that different.

If you are an early-stage enterprise software company, for instance, focus on seed- and early-stage investors who can help at that stage — whether it’s with customer introductions, advice in scaling out sales and marketing, or help to recruit top talent. Do your homework on the firm and the partner. Take into consideration that some firms have higher ownership requirements, might not invite other investors into rounds, or can be quick to fire CEOs. Most traditional VCs will also take a board seat. It’s important to consider whether or not these terms work for your business. The same can be said about CVCs — make sure to do your homework.

How to Choose the Right Corporate Partner

First, focus on the corporates that can provide the most benefit. Whether it’s a customer base you want to sell into, a product you want to further integrate with, or a company you want to develop a go-to-market relationship with, understand very clearly why you want to work with that partner. Many start-ups make the mistake of trying to partner with too many companies. Initially, focus on one or two deep partnerships. Creating too many partnerships out of the gate will dilute your effort and the impact you receive. Partnerships take more work than you realize in order to make them successful.

The Right Time to Engage a Corporate Investor

When you start bumping into a potential partner repeatedly with customers is often a good sign to start thinking about a partnership. It is also much more compelling to the strategic partner if you can tell the story of why and how you should partner, why it’s beneficial to both parties and give examples of customers where you would both be more successful working together.

The mistake many startups make is trying to partner with a large company too early without a clear understanding of how to work together believing magically that the large strategic partner will solve their sales and marketing problems. In fact, the opposite is true. As a startup, you have to do a good bit of the upfront legwork to help scope out the partnership and prove the potential value of the partnership. It’s not until the partnership starts to show success that the strategic partner will fully embrace it and accelerate the growth of your business.

Also, as a startup, if you can’t support customers that are introduced to you by the strategic partner as your product or organization is not mature enough you can damage the relationship with the strategic partner. Don’t engage with a strategic until your business is ready.

How to Assess a CVC

Once you’ve decided you it’s time take an investment from a corporate partner and you’ve identified the partner(s), then you should assess the CVC to make sure they are a good fit as an investment partner. Mark Suster recently spoke at a CB Insights conference — and had some excellent advice for burgeoning corporate venture capital divisions on the best practices for CVCs. For entrepreneurs, it’s a useful framework to assess CVCs to determine if they are a good fit for you.

1) What’s the goal of the CVC?

Are they mostly financially motivated, are they purely strategic — or somewhere in-between? This will help you better decide the potential strategic benefits, as well as what you are willing to compromise. The more financially motivated, the less strategic help you’ll get generally. Then you have to really compare the CVC to other institutional investors.

2) Does the CVC lead or follow investment rounds and do they take board seats?

At Salesforce Ventures, we generally don’t lead rounds or take board seats, as this would put us in competition with institutional VCs and add additional friction to the process. We would rather partner with VCs, as we serve different purposes that are complementary. Taking board seats can also create conflicts that need to be carefully managed.

3) Is there executive support for the investment program?

Support is often the hardest thing for CVCs to establish. Often you’ll find the CVC might have support from one or two senior executives, but not broadly across the organization. Without broad support, it can leave the program vulnerable to leadership change and limit the strategic benefit you will receive. You can determine this by who you meet during the diligence process and by who is on the investment committee. You should be meeting with the groups you will be partnering with during diligence and should get broad exposure to the company.

4) Are there restrictive terms such as a right of first refusal (ROFR) or exclusivity agreements on IP or market access?

This is often the biggest concern raised about strategic investors. These terms can limit your ability raise additional capital and can compromise exits. Most of the CVCs who have been in operation for the last 5–10 years understand this and don’t have onerous terms.

Make Sure You Do Your Diligence

As with any investor, make sure you do your diligence. Talk to existing and former portfolio companies to get their feedback to help you determine the pros and cons and if a particular CVC is a good fit. These reference checks will be the best source of feedback.

In the end, CVCs offer unique benefits that purely financial investors can’t, and generally it’s beneficial to have one or more CVCs on the cap table. Just be diligent: identify the best partner for your company and wait to engage until you are ready.