Founders should do their homework on potential investors before accepting any money.
That was one of the pieces of advice given at an exclusive business event organised by Sanderson Recruitment in conjunction with BusinessCloud.
David Levine, principal of Manchester Angels, said: “When you’re in the investment stage, the investor will do due diligence on you but you should do due diligence on them. Don’t just do due diligence on the people they offer up, speak to the people who they haven’t offered up.
“Look at the track record (of the investor). Speak to other people who have been invested in by that investor. The litmus test is when things have not gone well enough, whether a business has ended up going into administration or it’s not performed and the founder has been replaced. Go find that founder or those people involved and find out how that went down and how that ended.”
Laura Sisson, investment manager of YFM, added: “What might be perfect for one individual founder isn’t necessarily going to be the same for another. The thing is to identify what it is you’re looking for from an investor and what they’re able to do for you.
“Getting the money is only the start of the relationship. It’s long-term and that’s why it’s important to do your homework and see what that relationship is going to look like.”
Elizabeth Gooch MBE, founder and CEO of the Tech Growth Factory said perfect rarely existed in investment circles.
‘My wife was having cancer treatment when potential investors said no’
“I don’t believe anything is perfect in life,” she said. “Even if it looks perfect it’s probably going to change within 30 seconds. You need to do your due diligence.
“Most investors are investing for a return and they care about that return. When push comes to shove they’ll always come back to do that.
“At some point they’ll have to vote and you better get them on the right day. I’m not saying they’re all poisonous because I don’t think they are but I don’t think there’s a perfect investor.
“My advice for a founder when taking investment would be to be careful who you sell your equity to or give your equity to. Investors come into many guises. They’re not just people who put money into your company, they’re people who are sat around your board table, people that you have given equity to and they may leave, become disenfranchised, have different goals in life.”
David Levine, Laura Sisson, Elizabeth Gooch MBE
Russell Teale is the founder and CEO of Vivify, which helps schools hire out facilities outside teaching hours, and can count Bill Currie and former Tesco CEO Sir Terry Leahy as investors.
The startup has raised £2m, including £1m from Arete in 2022, and Teale said: “You need to find people who can help. Getting money is the easy bit but getting people who genuinely want to help and generate those returns alongside you is massive.
“While Sir Terry Leahy doesn’t sit around the boardroom table every month, he has a son who helps run his portfolio for him who happens to be a really great guy. They makes it a hell of a lot easier.
“The reality is that all the people who sit around that table have to know their roles. At the monthly boardroom my job is to deliver the number and come bearing gifts.
“If you come bearing gifts and scaling your business and it’s going well, you sail through those board meetings in 20 minutes, rather than four hours pouring through pages of reports telling you what you’ve not done.”
Sam Royle is the co-founder and CEO of SoSquared, which connects brands with influencers and has raised £300,000 and is looking to raise another £1m.
He told the Sanderson event that there’s a different appetite to invest in the US compared to the UK.
“I think it’s subject to the nature of my business being in the influencer and creator economy,” he said. “It’s not something that’s widely invested in across the UK.
“If it was purely B2B SaaS then fine. I think there is an appetite to invest in the UK but for more traditional tech software businesses.
“When I go to the US and speak to UK investors they are much more interested in investing in SoSquared. The problem with getting investment in the US is you need more traction with US customers. All our customers are domestic at the moment.”
The other speakers at the Sanderson Recruitment event were Daniel Simmonite, regional director, North and Midlands, Sanderson; Glyn Plowditch, co-founder, Dream Agility; and Rory Cameron, co-founder and ex-CEO of Gendius.