The Financial Investor, Strategic Investor - Which Sort Of Investor Will Support You And Your Small Company?

In the not so distant past, there was little difference between strategic and financial investors. Investors of all types sought to safeguard their investment by taking over as many management functions as they could.

Also, investments were small and shareholders few. A firm resembled a household and the quantity of folks involved - in ownership and in management - was correspondingly limited. Individuals invested in industries they were acquainted with first hand.

As markets progressed, the scales of industrial production (and of service provision) improved. A single investor (or a small group of investors) could no longer support the needs even of a single firm.

As knowledge improved and specialization ensued - it was no longer feasible or possible to micro-manage a firm one invested in. In fact, separate businesses of money generating and business management surfaced.

An investor was expected to excel in obtaining high yields on his investment capital - not in industrial management or in marketing and advertising. A manager was expected to manage, not to be capable of personally tackling the numerous and varying tasks of the company that he managed.

Thus, two classes of investors surfaced. One type supplied firms with capital. The other kind supplied them with know-how, technology, management skills, advertising techniques, intellectual property, clientele and a vision, a sense of direction.

On many occasions, the strategic investor also supplied the necessary funding. But, more and more, a separation was actually maintained. Venture capital and risk capital funds, for example, are purely financial investors. So are investment banks as well as other financial organizations.

The financial investor represents the past. Its funds is the result of past - right and wrong - choices. Its orientation is in short: an "exit strategy". This is sought as soon as possible.

Exit strategies bring fast profits. The stock exchange is actually a popular exit strategy. The financial investor is always on the lookout, looking for willing buyers for his stake.

The financial investor has little interest within the company's management. Optimally, his money buys for him not only a very good product and a superior market, but also great management. But his understanding of the rolls and functions of "good management" are very different to that supplied by the strategic investor.

If you are on the lookout for a financial investor, and you're on the verge of seeking bankruptcy services or corporate debt restructuring, contact a business consultant for help. The act of restructuring a company will be a lot easier for you if you have professional help.

The strategic investor, alternatively, represents the real long term accumulator of value. Paradoxically, it truly is the strategic investor that has the higher influence on the value of the company's shares.

The type of management, the rate of the introduction of new goods, the success or failure of advertising strategies, the degree of consumer satisfaction, the training of the workforce - all depend on the strategic investor.

Indeed, slowly and gradually, the balance between financial investors and strategic investors is switching in favor of the latter.

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