Startups have access to a wide range of potential investors, including venture capital funds, angel investors, incubators, and more. These types of investors, known as financial investors, typically choose to invest based on the likelihood of an exit within a few years, the potential for growth, and the expected return on investment.
However, there’s another type of investor—strategic investors—who aren’t solely focused on financial returns. Strategic investors select their next investment not just for profit but to provide their organization with added value or a competitive edge.
In today’s competitive market, large companies are constantly seeking ways to gain a significant advantage over their competitors. One of the ways they achieve this is by creating internal investment arms or innovation departments. Through these, they gain access to cutting-edge technologies and innovations, enabling them to expand and improve their product or service offerings.
Investment is not always a core part of a strategic investor’s DNA. Therefore, most of the negotiation weight in agreements with them will often revolve around commercial terms, such as exclusivity, preferred customer status, discounts, and more.
So, what are the main advantages of a strategic investor?
- Knowledge and expertise: Access to deep industry knowledge and valuable market insights.
- Connections: Opening doors to significant relationships.
- Access to resources: Infrastructure, data, experts, testing environments, customer base, and more—vital tools for product and service development.
- Validation: Collaborating with a large company adds credibility to the startup’s solution.
Who is a strategic investor suitable for?
Startups operating in a specific field: Partnering with a company that has deep expertise in the industry brings significant added value.
Startups needing access to infrastructure: Developing complex products and services often requires access to unique resources.
So, which is better—a strategic investor or a financial investor?
The answer often depends on the specific needs and goals of the startup. A strategic investor can offer invaluable industry insights, connections, and resources that can accelerate growth and enhance credibility. In contrast, financial investors typically focus on monetary returns and can provide the capital needed for rapid scaling.
At CivicLabs, we embody the strengths of both types of investors. As a strategic investor, we provide startups with access to our extensive network, industry expertise, and essential resources, enabling them to navigate their unique challenges effectively. Simultaneously, we act as a financial investor by offering funding opportunities tailored to early-stage startups in the Built Environment sector. Our approach combines the benefits of strategic partnerships with the necessary financial backing to foster sustainable growth.
The article was written by Shani Eisenman, VP Investments & Innovation at CivicLabs.
Contact her at Shani.Eisenman@civic-labs.com
