Investor Catnip: What Makes Corporate Spinouts Fundable

Corporate innovation teams don’t lack ideas. Nor do they lack capital. What they often lack is external validation — the kind that comes in term sheets, cap tables, and Series A rounds. Despite best intentions, many internal ventures wither under the weight of too many stakeholders and too few believers.

Now consider this: while internal initiatives fight for budget renewals, a new breed of venture is raising millions from outside investors. These are not wildcat startups. They are corporate spinouts — born inside large firms, but structured to act and grow like independent companies.

And increasingly, they’re becoming catnip for venture capitalists.

The Rise of the Fundable Spinout

A few years ago, most VCs would have raised an eyebrow at the phrase “corporate spinout.” Too much baggage. Too much control. Not enough hunger. But times have changed.

Recent successes — such as Lufthansa’s SQUAKE, spun out with €5 million in VC support, or Intel’s Articul8 AI, launched with a $100 million+ round led by DigitalBridge — have demonstrated that when properly designed, spinouts can offer the best of both worlds: the credibility of the parent, and the potential of a pure startup.

These ventures are no longer fringe experiments. They are becoming high-quality, de-risked investments. And the deal flow is heating up.

So what makes a spinout fundable?

Five Traits Investors Look for — and How to Deliver Them

1. A Focused, Non-Captive Market Thesis

VCs do not fund internal tooling. They fund companies solving problems in large, scalable markets. The first red flag for any investor is a spinout whose only customer is the parent.

Fundable spinouts show early traction beyond the mothership. SQUAKE didn’t just serve Lufthansa — it targeted the entire travel and logistics sector. Louisa AI, born inside Goldman Sachs, wasn’t kept as a proprietary tool. It was spun out to address the broader challenge of enterprise networking across industries.

For investors, market size is table stakes. But independence of market is just as critical.

2. Startup-Ready Leadership

The best spinouts are led by people who act — and think — like founders. Investors need to believe that the CEO has both the autonomy and the audacity to build something from scratch.

Articul8 AI appointed Intel VP Arun Subramaniyan as its CEO — but also gave him an independent board and full operational control. Investors took notice.

If your spinout is led by a part-time corporate director with matrixed reporting lines, it’s not a startup. It’s a governance risk. Investors will walk.

3. Clean Cap Table and Minority Corporate Stake

Investors don’t want to negotiate with risk-averse procurement teams or fight for board rights against a 70% corporate owner.

The golden rule? Keep the corporate stake under 50%. Ideally under 35%.

This signals that the company is serious about giving the venture room to breathe. It also leaves room for external capital and founder equity — both essential to long-term success.

When Goldman Sachs spun out Louisa AI, it retained a minority stake, welcomed angels and institutional investors, and let the platform evolve beyond internal needs. That open structure enabled post-spinout fundraising.

4. Transferable IP — With No Strings Attached

If the venture is built on proprietary technology, investors want clarity: who owns what? Is there a license agreement? Can the company pivot?

Intel contributed key AI software assets to Articul8 and structured IP licensing so the spinout could scale freely. Shell’s spinout Cumulus Digital did the same — licensing core tech, while maintaining independence.

Ambiguity kills deals. A clean IP arrangement — ideally written before external due diligence — is a prerequisite to close funding.

5. Proof of Execution and Speed

Investors are increasingly looking at what the venture has done, not just what it promises.

If the spinout has already launched a product, signed its first customers, or hit revenue — even better. But even short pilots or early traction outside the parent can serve as social proof.

What matters is this: can the team move fast and learn fast without waiting for HQ to approve the next meeting?

If yes, investors will listen.

Structuring for Capital — Not Comfort

The most common mistake in corporate spinouts? Designing them to preserve internal comfort, rather than attract external capital.

Too often, the parent wants to keep majority ownership, limit hiring autonomy, or appoint legacy leaders to “de-risk” the venture. But in doing so, they destroy the very thing investors are buying into — agility.

VCs don’t need a safer internal pilot. They need a credible venture with asymmetric upside.

If you want your spinout to raise capital, structure it accordingly:

• Keep the governance independent
• Cap corporate equity
• Give the founder meaningful ownership
• Allow outside investors real influence

And make the new company earn its survival in the open market, not through internal handholding.

The Economics of Shared Success

For the parent company, external investment isn’t a threat — it’s a multiplier.

By welcoming VCs or strategic partners, the corporation:

• Extends the venture’s runway
• Benefits from external expertise and networks
• Builds valuation without full capital exposure
• Retains optionality: reacquire, sell, or scale together

And it signals — to talent, to the market, and to future investors — that it’s serious about building ventures that last.

Done right, a spinout is a shared asset with shared rewards.

Final Thought

For years, corporate innovation has looked inward. But investors don’t. They look for sharp teams, big markets, and clean execution — wherever it comes from.

If your company can offer that through a well-structured spinout, the money will follow.

So the question is:

Is your spinout fundable — or just familiar?