Fundraising
What Investors Look for in a Startup
What early-stage investors really look for: traction, team, and a model that scales. It's about conviction, not just your deck.
June 27, 2025
Raising capital is never just about the money. For many startups operating in capital-intensive or highly regulated sectors, the right investor can offer much more than funding alone. Strategic institutional investors represent a growing and often underappreciated route to scale. Knowing when and how to engage them is crucial. Read on to find out more.
What Is a Strategic Institutional Investor?
Strategic institutional investors are investment vehicles tied to large corporations or public institutions. Unlike traditional financial backers, their objective is not just to maximise monetary return. These organisations are motivated by long-term alignment, technological innovation and strategic advantage. They might be looking to extend their product ecosystem, gain access to a disruptive technology or position themselves near emerging market shifts.
In the UK and globally, well-known examples include Google Ventures, BP Ventures and Unilever Ventures. These entities operate as formal investment funds but are also integrated with broader corporate strategy. Their support may include access to data, pilot programmes, distribution channels, infrastructure or eventual acquisition conversations.
Institutional investors are highly selective. They engage with startups whose technologies or business models fit with their corporate priorities. This long-term perspective means they are typically less transactional than standard investors, but also more demanding on strategic fit.
Who Are Strategic Institutional Investors and Why Do They Invest in Startups?
Strategic institutional investors usually sit within a larger corporate structure. Some operate as formal corporate venture capital arms. Others may be housed within innovation teams, business development functions or research and development departments. What unites them is their mandate to invest in startups not only for potential return, but for strategic relevance.
Why do they invest? Some are scouting for acquisition targets or technologies that can be integrated into existing operations. Others are hedging against market disruption by placing bets on challengers in adjacent sectors. A growing number are seeking collaborations that complement existing product offerings or enable internal innovation without building from scratch.
Some of these investors commit capital directly from their balance sheet, giving them flexibility and speed. Others raise dedicated venture funds, blending financial performance goals with strategic outcomes. The UK market includes active players such as Shell Ventures, Barclays Ventures, Aviva Ventures and Legal and General Capital. While they span different sectors, they tend to favour deep engagement over passive investing.
For founders, this means strategic institutional investors are rarely silent partners. They may offer guidance from technical experts, joint research initiatives or access to regulatory teams. In many cases, their investment is the beginning of a broader commercial relationship.
When Should Founders Consider Strategic Institutional Investment?
Founders should think about strategic institutional investment once their startup has moved beyond concept validation and entered a phase of traction and clarity. This is typically post-seed or early series A, when the company has a defined product, early customers and a business model that maps to industry needs.
Strategic capital is particularly suitable for businesses in complex or regulated sectors. These might include energy, insurance, mobility, biotech or manufacturing. If your company’s growth is tied to access to infrastructure, distribution, supply chains or policymaker networks, a strategic partner can offer real advantage.
Timing is critical. Approach too early and the investor may see risk without reward. Approach too late and the strategic opportunity may have already passed. Just as important as timing is clarity. Institutional investors want to see how your company helps them achieve their own innovation or operational goals. Demonstrating fit with their roadmap is the foundation of any serious conversation.
How Do Strategic Investments Work?
Strategic institutional investment structures can vary significantly. In some cases, they resemble traditional venture funding with priced equity rounds and standard term sheets. In others, the engagement might begin as a commercial pilot, joint venture or convertible note with strategic milestones. Revenue-sharing agreements and staged funding commitments are also common.
Ticket sizes range widely. Some firms make initial commitments of £250,000 to test a concept or market fit. Others provide growth capital north of £10 million once a strategic thesis is validated. What defines the process is not the cheque size but the number of internal stakeholders involved.
Unlike financial VCs, strategic investors do not move independently. Investment decisions often require alignment between investment teams, product owners, commercial sponsors and senior leadership. This makes timelines longer, negotiations more complex and post-investment integration more involved.
Board participation is common. Some investors will ask for full board seats. Others request reporting dashboards, observation rights, which allow them to attend board meetings and receive the same information as directors, but without voting authority, or quarterly collaboration meetings. Integration points may include shared R&D efforts, access to customer data or partnership with distribution teams.
These complexities make specialist support invaluable. ThatRound connects startups with fundraising services that understand how corporate venture operates. Our partner network helps founders prepare, engage and close strategic investment rounds by matching them with advisors and services familiar with this space.
Pros and Cons of Strategic Institutional Investment
For the right startup, strategic institutional investment offers a powerful mix of capital and commercial leverage. These investors can unlock access to supply chains, regulatory support, global brands and technical expertise that accelerate growth in ways money alone cannot. A successful relationship may even pave the way for a long-term partnership or acquisition.
Because of their scale and reputation, these investors also bring credibility. Startups backed by strategic investors often find it easier to attract new customers, raise further rounds or win enterprise contracts. They are seen as validated not just by capital, but by industry insiders.
However, the benefits come with trade-offs. Decision cycles are slower. Deals can take months to close. Strategic priorities are prone to change. If your investor’s business shifts focus, your support may diminish. Fundraising options can be limited if other investors perceive your company as overly tied to a single corporation.
There is also the risk of misalignment. A strategic investor may have operational or technical agendas that do not match your company’s needs. Founders must be careful not to build products solely to suit one partner or make compromises that limit future flexibility.
Where to Find Strategic Institutional Investors
Institutional investors are not easily found through conventional channels. Most do not accept cold outreach. Instead, relationships are built through sector-specific networks, innovation programmes and curated introductions.
Corporate startup initiatives, such as innovation arms and partnership programmes, are a good starting point. Industry conferences and private forums often host scouts or venture teams. Accelerators and incubators with a corporate focus also offer useful pathways.
Trusted intermediaries remain the most effective route. ThatRound’s fundraising partners specialise in identifying and accessing strategic institutional investors. They help startups prepare their proposition, target the right fund or corporate arm and manage outreach with a clear value proposition. For founders in sectors where alignment matters, these introductions can be the gateway to transformative capital.
Related content
