You are as Indonesian business owner, if your company group wants to develop a business, one thing that can be done is to find a strategic investor. Strategic investors are used to distinguish other types of investors who are commonly referred to as financial investors, such as private equity or fund managers. Strategic investors are usually pure business people, they are real players. For example, if you want to develop a port business in Indonesia and need investors, then Dubai Port or Hutcingson Port can be invited as a strategic investor. However, you can also invite financial investors such as JP Morgan or other private equity firms.
Both strategic investors and financial investors each have their pluses and minuses. But in this paper I will only discuss strategic investors.
If you want to partner with a strategic investor, that obviously requires a lot of careful planning. And you also need to explore first how much you need a strategic investor. And vice versa, strategic investors will not want to work with just any company. They also have their own standards that are different. Therefore, you also need to measure yourself who you deserve to work with as a strategic investor. This awareness and willingness to measure yourself is important so that your time is not wasted in the process of finding investors which ends up being in vain or failing.
Seeking capital from strategic investors can motivate both parties to engage in a larger commercial relationship, which also has great potential for the development of your company. There are many benefits to partnering with strategic investors. Of course each also depends on the investor. If you can choose the right strategic investors, it will not only increase your capital capacity, but also from marketing, distribution, sales, and organizational and HR development.
The investments made by strategic investors can help to 'legitimize' the company in a way that makes it easier to attract additional venture capital investment, because it makes future investors feel more comfortable about the company's technology and the suitability of the product to the market.
Some strategic investors can provide access to new accelerators, tools, copyrights and innovations, or knowledge that your company doesn't currently have that could assist your company's development efforts. This is especially important for companies that innovate in fields that require technological things. Strategic investors can connect your company to a wider range of expertise, markets and technology. Strategic investors may be able to lend expertise to your company that your company may not have access to.
Strategic investors are, in essence, strategically motivated and therefore not stingy from a valuation standpoint. Valuations from strategic investors are usually preferable. They want to invest in your company not only targeting shares in your company, but also for other interests. The most common ways that strategic investors seek strategic advantage is by soliciting licensing arrangements, marketing or distribution arrangements, some sort of collaborative development agreement with your company, or the option to buy your company. For example, a strategic investor might ask your company to license new technology to a strategic investor, or a strategic investor might ask your company to enter into a collaborative development agreement under which you agree to further develop a new product or new technology together with a strategic investor.
However, it is true that strategic investors generally want to be the majority shareholder alias at least 51%. This is common, but may change, depending on the business context.
What To Consider If You Are Looking For A Strategic Investor
If your company just needs cash or cash assistance, consider looking for private equity investors instead. Especially if your capital needs are not too big and not a "mega" project. However, if you are looking for a partner with players of greater scale and capability in your industry, consider strategic investors. You want to build a port with a total capital value of IDR 10 trillion while your capital is only IDR 100 billion, so don't dream of cooperating with financial investors, it's better to look for strong strategic investors. Also, for example, if you want to build a hospital with a project value of Rp. 400 billion while your capital is only Rp. 20 billion, obviously you can only partner with strategic investors.
Strategic investors are usually not limited when to exit, they are not in a hurry. It's just that, once again, they generally want to be the controlling shareholder.
If you have indeed decided to partner with a strategic investor, then prepare it carefully. Prepare first from your internal side, at least in concept, business plan and investment scenarios that will be carried out, including the calculation of ROI and pay back for the investors you will invite. Don't come to investors blind and raw. Remember, investors will judge you from the first meeting. And remember that there are hundreds of companies that come to them every month to ask for investment. So, it is not only your company that comes to them to ask for investment funding assistance. Their business development team, in a day can select 10 incoming business proposals and ask for joint funding. Moreover, if the investor has operations at the Asian regional level, not only for Indonesia. So, make sure your proposal is the best, worthy and interesting to be followed up.
As those with experience say, you never get a second chance to build a good first impression on a potential investor. Therefore, it is very important to be fully prepared from the start before meeting investors. Prepare your internal. Preparation should include creating an executive summary of the business plan as well as a non-confidential 8-12 slide pitch deck that briefly includes an overview of the investment criteria you need.
From there you must be able to show potential partners that your company not only understands what needs to be done, not only shows the need for capital, but also explains the stages and ways to achieve its business targets. There, at the same time, it has shown potential returns for investors. So, all measurable and numeric. Don't be idle. Doing business with global investors is not just rhetoric or just a presentation of interesting words, they will ask directly to the bottom-line, the calculation of profitability, pay back period, the obstacles, how the costing is, and so on. They will also at the same time make an assetment to your company how strong its execution capabilities are.
By the way, if your company needs strategic investors from abroad (outside Indonesia), I am ready to help find them with the support of our network. But please note, my strategic investor relations are not targeting SMEs, because they are global investors who have their own standards in terms of the minimum investment that can be done.