Everyday Heroes — VC and The Rise of the Strategic, Small Check Investor

Typically in startupland, a strategic investor is defined as the investment arm of a large, lumbering corporation, whose intent is to gain exposure to innovation by virtue of its pocketbook; in other words, a strategic investor pays now to minimize the downstream effects of disruption later.

I, however, prefer this definition, provided by businessdictionary.com:

“Individual or firm that adds value to the money it invests with its contacts, experience, and knowledge of market thus brightening the investee’s prospects for additional investment and success.”

This is how a strategic investor should be understood, and more importantly, this is how a strategic investor should want to be viewed through the eyes of anyone at the helm of any of his or her potential investments.

Unfortunately this isn’t often the case. Oftentimes, strategics are perceived to fall into the category of ‘dumb money’, the kind of money only the most desperate and foolhardy of entrepreneurs accept.

Another emerging group that falls into this oft-maligned category is the crowd. Currently, most of the money raised from investors away from the hallowed offices of Sand Hill is considered unsophisticated, misinformed or ‘dumb’.

I believe a new class of investor is emerging: The strategic, small check investor. The investor with the industry expertise and extended network required to make an impact for a company at the angel/seed stage. This investor may not be able to lead a round or make a typical angel-size investment, but may be a company’s customer or provide value through advice, experience, and network.

To reiterate, these are not traditional angels. These investors aren’t necessarily members of angel groups or may not have a history of early-stage tech investment. Nevertheless, they ae are growing in numbers and, as a collective, might prove to be the most influential early-stage investors our industry has come across yet.

In the early days of venture capital investing, the ecosystem was a walled-garden. Access was restricted to a certain class of investor, investment processes were opaque, as were reported returns.

Now, with dual evolutions taking place both technologically and legislatively, companies have the ability and opportunity to market their offerings to the world, and to those smaller, individual investors that have the ability to add value at a more granular and personal level.

At FlashFunders, I’ve been fortunate enough to witness this value add first hand. An early-stage company with a lot of potential is introduced to an investor with deep expertise and an extensive network within said company’s vertical. The company and the investor are able to connect, the investor invests and the company acquires an evangelist who is incentivized to evangelize.

As a new day dawns in the private markets, one in which we see more active participation from individual investors and the velocity and liquidity of the market increases, it’s important that our perception of investor value changes accordingly.

The era of the strategic, small-check investor has arrived…

Venture capital, as was previously known, will no longer be the same.