The risk of a snake eating it's own tail i.e. company invests in another who has to become a customer as part of the deal. Microsoft just did this recently IIRC with Azure - I forget which company. If the biz fails you lose your investment and your customer. So it's a high risk move.
In general I'd say for growth businesses that this is a red flag because it signals how much effort they're prepared to go to to increase revenue, and how much risk they're prepared to take on. It's worth asking why they can't get customers the traditional way, and why they have bandwidth internally to go to this amount of effort - bandwidth that should be applied to regular customers who want to buy.
From an optics perspective it looks good because the press loves transactions. So you get the press around the investment, and the knock-on press around gaining a new customer. But the fundamentals around this have that not-so-fresh smell.
In general I'd say for growth businesses that this is a red flag because it signals how much effort they're prepared to go to to increase revenue, and how much risk they're prepared to take on. It's worth asking why they can't get customers the traditional way, and why they have bandwidth internally to go to this amount of effort - bandwidth that should be applied to regular customers who want to buy.
From an optics perspective it looks good because the press loves transactions. So you get the press around the investment, and the knock-on press around gaining a new customer. But the fundamentals around this have that not-so-fresh smell.