Are Strategic Investors Important? No


Entrepreneurs are always looking for “Strategic Investors” – corporate VC such as Intel, Verizon, SAP, Microsoft, etc.  The view is that these investors provide not only capital, but also guidance on the product roadmap, engineering/dev resources, critical introductions, and they’re often customers themselves.   For instance Cloudera was 22% owned by Intel prior to the IPO.  The demand for strategic investors lead us to ask: how important are Strategic Investors and are they critical to success? The answer in our view is ‘no’.

 

To arrive at that conclusion, we looked at the major investors in 104 tech companies prior to going public.  We found that of the 104 companies, only 17 had a strategic investor.  The remaining 87 companies had only traditional VC or financial institutions as investors, but no strategics.  In other words, having a strategic investor was not critical to making it to IPO for 84% of the companies we looked at.  The data is below.

 

While there is certainly value in having strategic investors they’re not critical to success, based on the low density of strategics invested in tech companies that have gone public.  What’s more important is to find investors that help when they can, are supportive of the business (both financially and emotionally), and know when to step out of the way and let you do your thing.