Empirically it appears that while investing heavily in internal R&D, established corporations are playing only a relatively minor role in the financing of entrepreneurial companies, even if there seem to be ‘strategic’ reasons that would justify such investments. I examine theoretically how strategic objectives affect an established corporation’s ability to invest in entrepreneurial companies. With perfect contracting, an entrepreneur would always accept funding from a corporate investor. If investors can take non-contractible actions, however, the entrepreneur may prefer to be funced by an independent venture capitalist. This is because the corporate investor may provide too little support or exercise too much self-interested control. Outcomes depend critically on the extent to which the entrepreneurial company complements or cannibalizes the profits of the established company.