What are the pros and cons of investment from a strategic entity?

The following is from Ask The VC, where Brad Feld and Jason Mendelson of Foundry Group answer questions related to venture capital investment and startups:

Q: Can you please touch on issues associated with first round financings from corporate or strategic investors. Particularly when the strategic is a competitor. What are some of the pitfalls and opportunities associated with this type of an investor in an early stage company?

A: (Jason) There are both potential positives and negatives taking money from a strategic investor. And despite the arguments for and against, there is also are no bright line rules on wether or not you should accept strategic money.

Let us first look to the positives. Usually the biggest perk is the ability for a strategic investor to be able to accelerate and help your business in ways that a venture capitalist can’t. Strategics can offer access to manufacturing capabilities, technical resources, sales channels, foreign joint ventures, guaranteed retail shelve space, etc. The strategic can leverage their business to help you.

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