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hit it big, that would still be far more than the annual IPO statis-
tics. What happens to all the rest—the companies that are suc-
cessful but don’t go public? Attracting Outside Investors 205
Well, many of them simply become successful privately
owned companies; in fact, many of the most successful compa-
nies in this country are quietly owned by private interests. Yet
there are still a large number of companies that have great
ideas but still don’t raise venture capital money. Many of them
were started by entrepreneurs who had the same dream of a
rich exit as their IPO counterparts. Do they just give up and go
home? Not by a long shot. Many of these companies go the
other route—teaming up with an existing company that appreci-
ates the value of their ideas and hopes to improve its own busi-
ness through by the success of the start-up.
Such companies often become strategic investors, investing
in a promising start-up in return for both stock ownership and
the first opportunity to receive the benefit of the start-up’s inno-
vations. They may want the rights to sell the venture’s products
as their own, to incorporate the venture’s products into their
own, or to ultimately buy the start-up company and merge it
into their business. That benefit is mutual, if it’s done right:

• The venture gets access to the technical expertise of the
larger company to help it solve issues more easily.
• The investor gets innovation it likely is not nimble enough
to create by itself, except at an exorbitant cost.
• The venture gets a partner with much more marketing
muscle than it would have alone, perhaps even getting its
products into the strategic partner’s sales force offering,
producing a built-in customer.
• The investor gets to offer new products, perhaps including
state-of-the-art technology that it didn’t know how to
develop or wasn’t prepared to take the risk of trying to
develop.
• The investor may be able to purchase this company and
its products and innovation for a fraction of the cost of