#28 – Strategic investors – a Mistake or real Value-Add?

In this episode, we talk about Strategic Investors, detail what they are, their underlying realities and structures of operation, and present the case For and Against them. We also share Lessons Learnt that can be of value to you, if you are an Entrepreneur, a Financial/Institutional VC or a Strategic Investor. Navigation: Intro (01:33) Section 1: Context Setting (02:44) Section 2: The Bad Examples (12:01) Seciton 3: The Good Examples (21:39) Section 4: Other Players Join the “Party” (36:30) Section 5: Lessons Learnt for Strategic Investors, Entrepreneurs and VCs (41:25) Conclusion (51:31) Our co-hosts: Bertrand Schmitt, Entrepreneur in Residence at Red River West, co-founder at App Annie, business angel, advisor to startups and VC funds, @bschmitt Nuno Goncalves Pedro, Investor, Managing Partner, Founder at Chamaeleon, @ngpedro Our show: Tech DECIPHERED brings you the Entrepreneur and Investor views on Big Tech, VC and Start-up news, opinion pieces and research. We decipher their meaning, and add inside knowledge and context. Being nerds, we also discuss the latest gadgets and pop culture news Subscribe To Our Podcast Intro (01:34) Bertrand: Welcome to episode 28 of Tech DECIPHERED. This is a special episode on the topic of strategic investors. What are they, who are they, and are they helpful, how helpful can they be? I think it's one of the typical questions as an entrepreneur you would have to answer when you are considering getting financing. What type of investors, should I bring on board? And typically, early on, you might look at business angels. You might look at seed fund. And at some point, you would consider working with VCs. And you will probably discover that you have different type of VCs. On one side the sides we typically hear about in the news, in the press we are talking about more financial VCs. And on the other side of the spectrum you have what is called strategic investors, strategic VCs. Strategic sometimes for short. And we are going to talk about them. Who are they, what are they helpful for, how useful they are, how bad could they be for your business, for your startup. Welcome, Nuno, good to be with you to discuss this topic. How are you today? Nuno: I am well, in sunny California, so very well. Section 1 - Context Setting (02:44) Nuno: Maybe starting by defining what is strategic investors and where does that come from? The notion of they invest in, but they also contribute something that is more strategic. Maybe in the form of a partnership, or in the form of resources or other types of things that you put at the table. Normally, strategic investors are looked in the light, or as opposed to financial investors. So investors that are solely driven by the financial return and therefore, also solely driven by the capital that they put in. The world has become a little bit muddy over the last decade or so. There's now, investors that are more what I would call operating investor. So operating investors that jump into the company, and spend a significant part of their time in the company, sometimes even taking a significant part of the company, not just the classic minority in the company. But in order to simplify our discussion today, let's stick to the financial investor side, and the strategic investor side. So a financial investor would be someone like Chameleon, Red River West other VC firms that are out there, Sequoia Capital. We are investors that invest in a company, the biggest upside we can get is really financial. And obviously, we will produce value for the company under the form of helping the company scale, helping the company hire, helping the company get access to resources, and a variety of other things. So there is a little bit more operational minus in VC in general today, but the key objective of the whole thing is financial returns. A strategic investor, in many cases, when we talk about it, we use strategic investor as opposed to corpor...