What is a Strategic Investor?
A strategic investor is an individual or entity that goes beyond simply investing financial resources into a business or other investment opportunity. Investors of this type are often intimately involved in some aspect of the business operation, and actively contribute time and talents to help grow the business. This in turn increases the financial gains realized by both the strategic investor and everyone else who has a stake in the success of the business enterprise.
The various types of investors are usually segregated into two specific classes. One is known as a financial investor. This type of investor purchases shares or invests money into a business with the goal of eventually generating some type of return, either in the form of recouping the initial investment plus interest, or by means of receiving dividend payments from the shares in his or her possession. Many investors use this approach as a means of building a solid and varied financial portfolio, choosing investments based on their assessment of the soundness of the businesses issuing the shares and the ability of the owners and managers to grow those businesses and increase the returns.
A strategic investor is different from a financial investor, in that he or she not only buys shares of stock or loans money to a business, but becomes involved in the operation of that business. For example, an investor of this type may aid in making decisions regarding the acquisition of raw materials for the production of products, provide some type of assistance in project planning and management, or even oversee some day to day aspect of the company operation. The idea is to match the talents of the investor with the needs of the company, and increase the chances for both parties to benefit from the relationship.
Deciding to become a strategic investor means making a conscious decision to devote more than financial resources to the success of a business enterprise. Since the involvement in the life of the company is ongoing, investors of this type must set aside time to make sure any responsibilities they take on are managed effectively. A commitment of this kind is not to be entered into lightly, and must be treated as a priority for as long as the investment is held. For this reason, the strategic investor must often be especially selective in the investments he or she chooses. Failure to do so can lead to a great deal of frustration and possibly place the monetary investment at risk.
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