What are the risks of having a strategic investor?
We launch new series of 1-minute videos – tips for startup founders from Alexander Konoplyasty, co-founder of Flashpoint Venture Capital.
❓”What are the risks of having a strategic investor?”
👉 Such investors could create a potential exit conflict if there is a ROFR which is definitely worth restraining within a given share class
At times you might be approached by a strategic who is willing to be a part of your round syndicate for a minority position. Several things to keep in mind. Of course, there are positives like potential biz dev/ extra revenue, valid product signaling, and of course, you are potentially getting deeper pockets in your capable. But also there could be a number of issues. Bear in mind a conflict of interest with potentially competing customers. Watch out if such an investor asks for preferences, which could lead to discrimination of other investors in terms of their rights. Such investors could potentially create issues for the next round of fundraising, VCs might not like having a strategic.
Could further create a potential exit conflict, if there is a ROFR which is definitely worth restraining within a given share class. In summary, there are pros and cons which you need to work closely with.