Lane Powell Shareholder Patrick Franke authored an article in Seattle Business magazine’s June 2014 issue titled “Reward v. Risk: Advantages and Disadvantages of Courting Strategic Investors.” In the article, Franke discussed the potential benefits and risks that venture-backed companies should consider when they receive an investment opportunity from a strategic investor.
Market/industry credibility. An investment by a successful and well-respected player in a company’s industry is a sign to the market that an investor who really understands the industry believes in the firm’s business model and/or technology.
Build a relationship with a helpful partner and/or potential acquirer. A strategic investor often allows a company to expand or accelerate its business through the investor’s distribution network, sales and marketing infrastructure or other facet of its business. In addition, a successful business relationship with a strategic investor may lead to an acquisition by the investor.