“I’m after ‘strategic’ investors!”
This is a statement that I’ve often heard from founders seeking to raise capital for their startup. If you’re a founder who can relate, then consider the following five broad categories of venture capitalists as a useful paradigm to help you pick the right type of investor for your business.
Thematic Investors
Study trends and scour the field to arrive at their own theses about where the big opportunities lie.
Pro: Bring outspoken strategic input and market intelligence to your venture.
Con: They may prefer their own judgement on such things over yours.
Domain Investors
Usually have business experience in a particular industry, such as health care, semi-conductors, or financial services (“fintech”).
Pro: Bring a wealth of industry experience and connections to your venture.
Con: They may be prisoners to their own experience and resistant to your new, industry-disrupting ideas.
Quant Investors
Given the rise of big data, social media and online tracking, these venture capitalists are aggressive and don’t need to know much more about your business than the numbers.
Pro: Quant investors are diligent students of growth and can bring that perspective and those skills to your business, helping you to use all the available digital growth tools to full advantage.
Con: They often have little operating instincts and provide help with strategy or execution.
People Investors
Rely on the ability to judge the quality and character of people by listening to entrepreneurs explaining their vision for solving particular problems.
Pro: They value talent highly and are anxious to invest themselves in you and your team.
Con: People Investors might not be particularly expert at any one thing that you need.
Growth Investors
They specialise in later-stage ventures, and are generally strong financial analysts who run detailed models to test business plan sensitivities.
Pro: Since they’re adept financial architects, they can be very helpful in preparing your company for eventual liquidity.
Con: Growth Investors tend to be analysts, not operators, and their input is skewed accordingly.
Any of these venture capitalists can be the “strategic” or “successful” board member, partner, or investor for you depending on fit and chemistry. Just know what type you want, so you know how to extract the most value from them.
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