5 Ways to Take Advantage of Corporate Venture CapitalDon't overlook this funding option.

Entrepreneurs have multiple sources of funding when they seek their first outside capital: friends and family, professional angels,venture capital (VC) fundsand crowdfunding platforms. One type of funding, which is sometimes overlooked and which can be quite powerful, is corporate venture funds.

Corporate venture funds come in different shapes and sizes, but typically, they are funds affiliated with large companies that are interested in tapping into innovation taking place within particular industries. Loosely referred to as "strategic" investors, they represent a fast-growing segment of the funding market. According toCB Insights, there are nearly 200 active corporate VC funds. In 2015, they invested about $18 billion across 850 companies in the United States alone. Notable funders includeGoogle/GV,Comcast Ventures,Bloomberg,Intel CapitalandSalesforce Ventures.

Given the size and scope of these funds (and despite someindustry misconceptions), corporate VCs present a strong option for entrepreneurs looking to get the most value from their investors.

So, what are several of the unique advantages that they offer?

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1. Market validation

Corporate VC funds can provide access to established customers and accelerate a startup's ability to find itsproduct/market fit. Most companies creating these funds tend to have large installed customer bases and can identify early adopters for new technology. Gaining this type of entry can be difficult for an unknown startup still trying to build its credibility. The value of nailing down product/market fit cannot be understated as it sets the stage for acquiring a company's first set of paying customers.

2. Revenue growth

Once market validation is achieved, developing a commercial agreement can generate much-needed revenue in the early days of a startup. This should be set up as a stand-alone agreement -- not tied to the investment agreement -- that provides market value to both sides. By securing paying customers, you can lessen the requirements for outside capital and, at the same time, demonstrate a sustainable business model.

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3. Domain expertise

Since large companies have a history of being in business, they possess institutional knowledge that can help startups think about issues related to their target market. Daily interactions with customers produce insights that may have implications to a startup's product or marketing strategy. Furthermore, a startup can improve its visibility in a competitive landscape.

4. Access to capital

Securing an investment from one strategic investor can encourage others to do the same, because if a strategic partner understands the market and the problem and it's willing to put money into a company, then there must be value there. Plus, many corporate investors, whether they are investing from the parent company's balance sheet or a dedicated fund, will invest in multiple rounds. This renewed commitment is a positive market signal and can ease the burden of additional fundraising.

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5. Inherent exit option

Unsurprisingly, investors often choose toliquidate their positionsin a business, particularly if they acquire new companies with pre-existing commercial relationships. Over time, as a relationship develops, dependencies can occur that spur an acquirer to want to own the assets, for offensive or defensive reasons. Diligence for these types of deals is a bit easier as the acquirer is already familiar with the company's business and executive team, which makes things move along more quickly.

While corporate venture funds are not silver bullets for getting customers or formulating an exit from day one, they can provide a lot of shareholder value if leveraged properly.