Every year, YFM will meet over a thousand founders looking for investment and only invest in 1%.
Many have strong fundamentals, clear vision, real growth potential. Yet will still walk away without funding, not because the business wasn’t good enough, but because the founders didn’t understand what they were walking into.
When I’m meeting a business for the first time, here’s what actually matters.
The person behind the business
First impressions matter. Most investors make up their mind in the first few minutes of a meeting – everything that follows just confirms or changes their gut call.
At YFM, we’re backing the person, because the plan will almost certainly change during our investment period. The question you go into a meeting with is: can we work with this person through the difficult quarters?
What I’m not looking for is polish and someone who comes with all the right answers. I’m looking for honesty and self-reflection. A founder who can identify where their business needs to strengthen and even better, being demanding on YFM to explain how we can help beyond just cash. The relationship needs to be two-way and the founders who move fastest through an investment process are those who treat it as a conversation, not a performance.
Customer relationships, not revenue
Two businesses with identical top-line numbers can represent fundamentally different investment propositions, depending on how those numbers are generated. Recurring, contracted income from long-standing customers is worth significantly more than equivalent revenue from one-off or project-based work, because it’s predictable. And predictability is what allows me to model a business plan and prepare for an exit with confidence.
The first piece of due diligence we will ask for is some early customer referencing. A business where a single client accounts for more than 25% of revenue introduces a risk that’s hard to predict no matter how much due diligence you do and positive references you get. The question is simple: what happens to my valuation if that relationship ends?
Clean, transparent financials
The most common financial issue in founder-led businesses isn’t mismanagement. It’s muddiness. Years of blurred lines between personal and business expenses; company cars, family salaries, yachts(!) sitting on the balance sheet. Each one obscures the true underlying profitability of the business, which is the number I use to anchor any valuation. Numbers that require lengthy explanation invite scrutiny that clean numbers simply don’t.
A credible, specific path to growth
Ambition is not a strategy. What I want to see is a clear, evidence-based understanding of how the business will grow, the levers that will be pulled, the markets that will be entered, the bottlenecks that investment will address. A projected revenue chart with nothing behind it raises a question that’s very hard to answer from the outside: is this growth based on evidence?
Common mistakes when seeking funding
Starting the conversation too late
The preparation that moves the needle; cleaning up the financials, diversifying the client base, building the leadership team, addressing contractual gaps – all takes time. As an investor we don’t want to see systems being put in place, we want to see systems that have been operating well, with a track record behind them. Ideally, that preparation should start 18 months to two years before you intend to raise. Most founders start six months out.
Overlooking the basics
A client who has spent five years buying from you without a signed contract is not a relationship. It’s a liability. Verbal agreements, outdated contracts, change-of-control clauses that give counterparties the right to exit on a sale; these are among the most avoidable risks in any funding process, and among the most damaging when discovered late. The same applies to intellectual property. IP that’s informally attributed to the business rather than properly registered introduces uncertainty that I’ll price in negatively.
Overall, the businesses that make the 1% share four things: they can explain why their market position is genuinely defensible; they’ve turned customer loyalty into contracted revenue rather than informal relationships; they show a trajectory, not a snapshot – metrics moving in the right direction, an inspirational leader; and they know exactly what the investment will do. That level of clarity is rarer than it should be. When we see it, deals move faster.