Strategic Investors can be individuals, corporation, firm or business units that invests directly in startups with the goal of benefitting strategic advantages like entering into the new markets, acquiring new and trending technologies or creating synergies. Strategic Investors plays a vital role in the expansion and development of businesses by providing not just financial assistance but also offering access to distribution channels, valuable networks, industry expertise and guidance.
BENEFITS OF STRATEGIC INVESTORS
A strategic investor can offer several diversely useful groupings that can speed up and strategically place firms in the markets they operate in. Some of the benefits include:
1. Access to resources and expertise:
Strategic investors are much more than that of finance providers. Such elements from strategic investors may include expertise and other capabilities that can give a firm a more profound feel and strategic positioning.
Industry Expertise: Strategic investors are knowledgeable in their space. Thus, the healthcare focused investor would comment on what their FDA requirements are; similarly, the technology investor could counsel the startup through the best software development practices.
Technical Capabilities: The startups can leverage the technical infrastructure, research and development capabilities, or special skills that the investor owns. These could be challenging or expensive to develop in-house.
Business Relations: Strategic investors may have connections with the big players like suppliers, distributors, and potential customers. Start-ups would benefit from using such ties to speed their market entry or strategic partnerships.
2. Synergies:
While it is very difficult to find strategic partners, the “best” of them might, under optimal circumstances, unlock grand synergies to assist in expanding the growth options available to the startup.
Distribution Channels: The investor can give the startup access to existing distribution channels that can quickly help the startup reach a larger customer base.
Manufacturing Capabilities: In case the investor possesses manufacturing, knowledge or has manufacturing facilities, a startup can save costs or enhance the quality of products by harnessing such capabilities.
Complementary Technologies: Strategic Investor can bring in complementary technologies or intellectual properties wherein those would complement the startup own innovations and create an opportunity for product enhancement or new solutions
Accelerated Growth Opportunities: Strategic investors look for scenarios where the collaboration would yield benefits to both the startup and investor and then lead to mutual growth that would be hard to achieve independently.
3. Strategic Positioning: The value generated by a legitimate strategic investor significantly enhances the credibility and the strategic positioning of the new venture in the market:
Higher Credibility: A collaboration with a known industry player brings credibility to a new venture, mainly when trust and reputation are the biggest factors in play-for example, when firms engaged with the emerging or untapped markets.
Skills: A positive nod from a few known investors will attract good quality talent as they will be under the impression that the startup might be stable and a good opportunity.
Future Fundraising: With a strategic investor on board, future investors would know that the startup indeed got vetted and validated by industry experts. In other words, this might create a smoother road toward acquisition of more funds from investors.
Strategic Market Advantage: From the connection, a start-up might be able to get market trend information, competitor strategies, new opportunity information, etc. that proves to be a strategic advantage for the company.
4. Long-term Partnerships and Growth Support
Strategic investors in many ways are keen on high long-term growth instead of short-term returns. This would result in strategic investors having a longer investment horizon, therefore focusing on sustainable growth where start-ups would be given time to reach such milestones.
Co-Development and Co-Marketing Opportunities. In this very close relationship, startups and strategic investors would be able to develop products or marketing initiatives where both may benefit.
CONCLUSION
Long-term strategic investors are fabulous allies. They bring more than capital to the table. The difference between the right investors will only be known by what drives them, and a compelling narrative will bring into place strategic partners that will move the start-ups to the next levels. Maintaining the relationship once invested and continued alignment of their interactions will look to maximize benefits and ensure sustained growth.