If you ask most entrepreneurs about sources of investment, they quickly mention angel investors and venture capitalists. That’s not a surprise, but many CEO’s of startups are missing out on one of the best potential investment sources. And that is the form of strategic corporate investment.
Strategic corporate investors are companies that invest capital in private businesses, much like a venture capital firm. However, their motive is slightly different from a VC firm.
Of course, strategic corporate investors do hope to generate a return on their investment. But they’re after something more strategic: innovation that will add to their competitive advantage.
According to data from CB Insights, strategic corporate investments hit an all-time high in 2014, and have been rising for years.
Because large corporations have operated conservatively in recent years. This resulted in huge chunks of cash accumulating on their balance sheets.
That may sound like a good problem to have, but since public companies are owned by shareholders, it creates a bit of a problem. It means that the company’s board of directors must make a choice of how to handle the cash.
Common options include:
- paying dividends to shareholders,
- investing in research and development,
- parking the money in a government vehicle, or
- acquiring businesses.
But, another option is to invest in startups within the company’s vertical market. This option bridges the gap between acquisitions and investing in R&D because most large companies struggle with being innovative.
And that’s good news for you and your startup.
Your innovation can help them maintain or grow a sustainable competitive advantage. And their investment can help you in more ways than you can probably imagine.
I describe how to find the right investors in the SmartMoney Playbook. It’s free, and you can grab it here.
I’m not just talking about the cash because strategic corporate investors can be the ultimate SmartMoney investors. You’re unlikely to find a VC or angel investor who knows more about what’s happening behind-the-scenes in your industry.
They’ll also know about all the new technology and human talent, and have insights into customer demands. Of course, they can also open doors to very large accounts for your company.
Some of the largest corporate venture investors include:
- Google Ventures
- Intel Capital
- Salesforce Ventures
- Qualcomm Ventures
- Cisco Investments
- Fidelity Biosciences
- GE Ventures
- Johnson & Johnson Development, and
- Bloomberg Beta.
If you’ve got a great business opportunity, you need to be sure you’re on the radar of potential corporate investors in your space. You can meet them at industry conferences where they often speak on panels.
And, if you think it’s too early for you to approach them because you’re early stage, think again. Almost half of investment deals involving corporate investors are now early-stage deals! In fact, Microsoft Ventures just this week announced a new corporate venture group to focus ONLY on early-stage deals.
Targeting strategic corporate investors for your startup make sense, and can be one of the best ways to raise SmartMoney. Watch, as I share why I believe that.
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