Few requests arrive earlier in a startup’s commercial life, or carry more weight, than a large partner’s request for exclusivity. Handled well, an exclusive arrangement is commercial validation that strengthens the next fundraise. Handled badly, we have seen it dissolve before reaching market and then hinder a company’s financing and development for years afterwards.

In June we held a closed session for our portfolio with two practitioners who have sat on both sides of these negotiations: Chase Brennick, a commercial lawyer at Covington & Burling who drafts and negotiates these agreements for a living, and Sharon Walbert, a Synthesis advisor with more than three decades inside large food and agriculture companies, including Cargill and Bunge.

Ahead of the session we surveyed our founders. Nearly every respondent had already been asked for exclusivity by a prospective partner. For two-thirds, it came up in the very first commercial conversation, and for around 78% it surfaced during the earliest legal or partnership negotiations, often before the founder had worked out what they wanted from the relationship. A few of the main lessons from the discussion follow.

Why partners ask for exclusivity

A request for exclusivity is often a starting position rather than a settled requirement. For many large companies, an exclusivity provision is a standard term in the template sent to every prospective partner, and its presence in a first draft does not necessarily mean the partner has concluded it needs one. A founder who assumes the clause reflects a firm requirement may concede more than the partner was ever expecting.

Where it is deliberate, it usually reflects one of two legitimate concerns: the partner is protecting a first-mover advantage, or wants assurance that the startup will have the capacity and focus to serve them. These are different problems with different solutions (a defined head start addresses the first; capacity and service commitments address the second), and neither can be addressed until the founder understands which one is on the table. As Sharon noted from her experience inside large companies, these organisations are built to manage risk, and exclusivity is one of the ways they make a new relationship feel safe. Understanding that concern is the starting point for a structure that works for both sides.

Scope is where the negotiation actually happens

If some exclusivity is needed, the work is to define it precisely. Chase describes this as “stacking adjectives”: exclusivity in this geography, for this category, in this application, during this phase. Exclusivity aligned to where the partner actually operates and intends to sell is easier for the partner to justify internally, and leaves the startup room to build a business elsewhere. Both sides tend to be better served by a narrow, well-defined exclusive than by a broad one that neither can fully use.

Two practical points help here. The first is transparency about existing commitments. A startup that sets out its current obligations to other parties early avoids a situation in which a partner unknowingly asks for terms the startup cannot grant without breaching another agreement, which serves nobody. The second is supply chain resilience. Since the pandemic, most large buyers have become cautious about single-sourcing, and a supplier whose business depends entirely on one customer is a concentration risk for that customer too. A narrower exclusive that leaves the startup with a diversified customer base is often in the partner’s own procurement interest, and is worth presenting in those terms.

Making the timeline work for both sides

Sharon’s preferred approach is an exclusive evaluation period: a defined head start of six weeks to six months, rather than exclusivity for the life of the project. It satisfies a first-mover concern, gives both sides time to find out whether their ways of working fit, and defers the larger commitment to a point where both parties know more. A phased structure reduces the partner’s risk (nobody wants to have spent money on a technology that turned out not to be what they needed) as much as the startup’s, and it is more persuasive presented on that basis.

Open-ended terms were both the most common ask (two-thirds of our founders had received one) and the most damaging. Chase’s advice was simple: however much time a project is given tends to be the time it takes, so work that could be done in a month will take a year if the agreement allows a year. Three mechanics help:

1. Tie exclusivity to commitments on both sides. An agreement that sets out what each party contributes, and by when, gives everyone a reason to keep moving. Chase has seen exclusivity structured to lapse automatically if agreed purchase volumes are not reached.
2. Replace automatic renewal with mutual opt-in. A two-year term that rolls into another two unless someone remembers to object is exclusivity by default. An opt-in creates a natural point at which both sides assess whether the relationship is delivering what they expected.
3. Include a termination right. A defined exit protects both parties if the relationship does not develop as planned, andis what makes an otherwise broad exclusive manageable.

Agreeing the value exchange with the right decision-maker

Exclusivity has a price, and the payment need not be cash. In-kind contributions (regulatory support, market analysis, engineering time, access to a sales force the startup could not afford to build) can be worth more than a cheque, particularly where a marquee partner strengthens the next fundraise. That signalling value depends on whether the relationship can be disclosed, so it is worth agreeing this explicitly. An arrangement in which the startup is a confidential supplier and the product is white-labelled may be a perfectly good commercial deal, but it does not provide the market credibility a founder may have assumed they were receiving.

Finally, negotiate with the person who will own the decision. An R&D director may only be able to commit around $100,000 before a formal capital request is required. Beyond that threshold, the person who will put their name and budget on the project needs to be involved. Founders too often agree terms with an R&D contact whose enthusiasm is real but who cannot ultimately commit the organisation.

Closing thoughts

None of this makes exclusivity something to avoid. The founders who have navigated it well treated it as a negotiation with a clear price, a defined scope, and a known exit. The partners who have made it work took the same view: the arrangements that last are the ones both sides can explain and defend internally, long after the first draft has been signed.

We are grateful to Sharon Walbert, Chase Brennick and Deepti Kulkarni (Covington & Burling) for their generosity, to David Welch for moderating, and to our founders for the openness they brought to the discussion.

This piece distils some of the lessons from a private session held for Synthesis Capital portfolio companies. It is general commentary, not legal advice. Every deal is different, so talk to your own counsel before you sign. Survey figures are drawn from anonymised, aggregated responses from participating founders.