Personally, I would advise founders against taking a corporate strategic investment unless there is a significant and tangible benefit (I’m not talking about CVCs, I’m talking about strategic investment from a company’s balance sheet).
There are many reasons why strategic investments could potentially go wrong:
- In big companies, people come and go. Your deal champion (e.g., a VP or a corp dev head) may be replaced by someone new who knows nothing about your company or even has negative views about it
- The money often comes with a commercial agreement that prevents your company from working with other companies
- After the investment, the strategic investor’s directions may change and may no longer align with your company’s goals. (Meanwhile, financial investors’ interests will almost always remain aligned with yours)
- A strategic investor might lead a round but then not participate in the subsequent round, which can be seen as a red flag
- Inside the strategic investor, there might be a team that has been developing a stealth project directly in competition with your product. You become the biggest enemy of some people inside the company that invested in you. Some of these people won’t stop playing BS big company politics
- The strategic investor can limit your acquisition options – either they directly block, or other companies lose interest in your company preemptively
- A shady strategic investor might even put in a small check in your company and absorb the knowledge (eg your product roadmap) and build a copycat product in-house
But every case is different, and for some companies strategic investors can be a lifesaver. Just imagine Samsung investing in a company and installing their technology in all upcoming Samsung smartphones by default. So it really depends.
That being said, I’ve seen many more cases where strategic investments went wrong rather than right, so it’s definitely something for the founders to be mindful of.