Capital Raising — What you should be looking for in an investor

Published on
November 3, 2022
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An injection of good capital can take any business to the next level. However, one common mistake entrepreneurs make is thinking that any capital, no matter the source, is a win.

This is why most founders want to get funding fast without considering: 1) why they want one, 2) what their boundaries are, and 3) what they will use the funding for.

As scale-up specialists, we at BeingIconic know that our choice of partners can make or break a venture.

The truth is that — in some cases — funding can kill any business, especially if there is a major disconnect between the entrepreneur and their investors. Hence, working toward finding and accepting only the right kind of investor is essential to long-term, sustainable success.

Here are five attributes you should look for when vetting an investor for your growing business.

1) Investors Who Trust Your Process and Vision

Having investors who trust business leaders completely without wanting to take over the wheel is key to any successful entrepreneur–partner relationship. For businesses to achieve or exceed lofty targets within ideal timeframes (or less), investors have to have respect for the entrepreneurs’ process and vision.

Great investors are the ones who make consistent efforts in working toward the business’s goals instead of their own. They understand that it is their job, as partners, to work for the entrepreneur and the business and not — like many others see it — the other way around.

For any venture to be successful, it is important to think about the vision, the business as a whole, and where it can possibly go. Ask the important questions, such as: Why do I want an investor and do I really need one? What are my boundaries/guidelines? Can I trust Investor X to support and guide me through my vision of where I want my business to go? Why or why not?

2) Investors with a Valuable Network

Any entrepreneur looking to scale their business knows that connections play a crucial part in their success. With the right network, any venture can go from Point A to Point B, C, D, and so on, in as little time and with as little wasted resources as possible.

An investor’s money can only go so far if they cannot open new doors for the business. When searching for investors, it is important to take a pause, tune out the noise, and evaluate whether or not they have an existing network that is relevant to your business (or even the ability to build a relevant network). More authentic personal and professional relationships allow new partnerships, sales, exposure, insights, influence, etc. to come in the door and cement the business’s place within target markets and industries.

3) Investors with Relevant Industry Experience

What makes Warren Buffett a successful investor?

Apart from intelligence, he also has over 50 years of experience in his chosen fields of expertise. Among many other successful investors, Buffet provides repeatable performance and success. He also has a long, profitable track record with minimal risk and small drawdowns.

Buffet is a testament to why not all experience is equal. Just like having the right network can empower investors to pluck relatively unknown businesses out of obscurity, an investor’s industry experience is king when it comes to scaling a business.

Business leaders need to sort the wheat from the chaff and ensure that the people they allow to tag along their scale-up journey can provide them with much-needed support and guidance during their most critical stages of growth.

With a deep understanding of the industry, investors can guide entrepreneurs through core business functions like customer service, product development, strategic planning, and even financial management.

Seasoned investors have the experience to take technical information and learnings and turn them into powerful industry insights and benchmarks that entrepreneurs can leverage when planning their next short- and long-term moves.

Ask the important questions: Does the investor understand the business? Is the investor working on projects related to the business?

Review the investor’s focus areas and current portfolio to assess how knowledgeable they are about the business and industry.

4) Investors Who Fit Your Business Brand and Culture

Choosing an investor means having a team player who helps further the business’s purpose and creates value for both shareholders and stakeholders alike. If their approach to conflict, communication, and collaboration differs from the organisation’s, they might not be a great business fit, no matter how experienced or connected they are.

Gauging their degree of social awareness, emotional intelligence, and willingness to adopt and support business brand and culture will ultimately indicate if they can be a great partner or simply another bottleneck toward sustainable, purposeful success.

5) Investors Who Invest Beyond Money

Before partnering with an investor, it is important to appreciate that they are not made from the same cloth. One investor may be able to commit their time and energy more than the other, and that is alright.

However, if an investor only brings in cash and nothing else, they may not be the right fit. So, before anything else, ask questions like: How many portfolio companies do they work with? What can the business expect in terms of collaboration and communication? How often and intense will their involvement be?

When raising funds, it can be tempting to accept the first offer that comes along. However, when entrepreneurs take the time to find investors who are willing to fully commit and dedicate their time, the returns are ten-fold.

With the right investors on your side, you get vision clarity, business growth, and improved brand reputation. The wrong investors, on the other hand, can undermine your growth, dampen your enthusiasm, and — worst of all — rob your company of the opportunity to thrive.

As scale-up specialists, we at BeingIconic have successfully partnered with various Australian business leaders when finding the right investors and securing powerful capital. Partner with us today if you want us to do the same for you.