The Financial Investor And The Strategic Investor - Which Sort Of Investor Will Help You And Your Small Business?

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

Additionally, investments were small and shareholders few. A firm resembled a household and the number of individuals involved - in ownership and in management - was correspondingly limited. Individuals invested in industries they were familiar with first hand.

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

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

An investor was required to excel in obtaining high yields on his money - not in industrial management or in marketing and advertising. A manager was required to manage, not to be capable of personally tackling the various and varying tasks of the business that he managed.

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

Oftentimes, the strategic investor also supplied the required funding. But, more and more, a separation was maintained. Venture capital and risk capital funds, for instance, are purely financial investors. So are investment banks and other financial organizations.

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

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

The financial investor has little interest within the company's management. Optimally, his money buys for him not just a superb product and an excellent market, but additionally good management. But his interpretation of the rolls and functions of "good management" are very different to that offered 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, get in touch with a business consultant for help. The act of restructuring a company will be a lot easier for you when you have expert help.

The strategic investor, however, represents the real long term accumulator of value. Paradoxically, it's the strategic investor that has the higher influence on the value of the company's stocks.

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

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

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