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Should You Consider a Strategic Investor When Raising Venture Capital?

Strategic investors can be a valuable source of capital, but are they critical? No, they aren’t as important as you think.

What is a Strategic Investor?

Strategic investors, also known as corporate venture capital firms, are defined as corporations that make venture investments. Some notable strategic investors include Salesforce VenturesIntel CapitalVerizon VenturesSAP, and Microsoft. The view is that these investors provide not only capital, but also guidance on the product roadmap, engineering and dev resources, and critical introductions.

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We dug through the S1’s of 105 tech companies and found that only 17 out of the 105 investors had a strategic investor (an S1 is a doc filed with the SEC before going public). The list is below.

Companies with a Strategic Investor Companies with a Strategic Investor Companies with a strategic investor

Should You Consider Strategic Investors When Raising Capital: Factors to Consider

Some of the companies in our own portfolio have strategic investors such as Match, General Electric (GE), Cisco Investments, Salesforce Ventures, the CIA’s venture arm In-Q-Tel, and SurveyMonkey. What we’ve found is that in most cases, they don’t add much value with respect to exiting.

These investors invest because they think the company is interesting. They want to be in a position to acquire a company if the company shows great potential. In other cases, they invest because they’re heavy users of the product. In this case, these investors are extremely valuable.

Strategic Investor vs. Venture Capital

Notably, some industries have more prevalence of strategic investment than others. For instance, three out of the seven hardware companies we looked at had a strategic investor whereas industries like marketplaces, social media, and e-commerce barely had any.

If you are going to take on a strategic investor, make sure they don’t have any unique controls or rights outside of those granted to normal investors. For instance, some strategics will ask for a Right of First Refusal to buy your company, which can be very damaging when it’s time to sell your business — no one will want to buy you if they know that after all their hard work, XYZ strategic can cancel the deal and buy your company themselves.

Also, make sure that they do not have control over the direction of your product — it’s great to take their advice when that advice fits into the roadmap, but investment doesn’t give them the right to mandate what you build.

As always choose your investors wisely, but don’t fret if the strategies aren’t a part of your business.


Sammy is a co-founder of Blossom Street Ventures. They invest in companies with run rate revenue of $2mm+ and year over year growth of 50%+. We can commit in 3 weeks and our check is $1mm. Email Sammy directly at sammy@blossomstreetventures.com.