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 in conjunction with 老九品茶Cloud.
David Levine, principal of Manchester Angels, said: 鈥淲hen you鈥檙e in the investment stage, the investor will do due diligence on you but you should do due diligence on them. Don鈥檛 just do due diligence on the people they offer up, speak to the people who they haven鈥檛 offered up.
鈥淟ook 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鈥檚 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.鈥�
Laura Sisson, investment manager of YFM, added: 鈥淲hat might be perfect for one individual founder isn鈥檛 necessarily going to be the same for another. The thing is to identify what it is you鈥檙e looking for from an investor and what they鈥檙e able to do for you.
鈥淕etting the money is only the start of the relationship. It鈥檚 long-term and that鈥檚 why it鈥檚 important to do your homework and see what that relationship is going to look like.鈥�
Elizabeth Gooch MBE,聽founder and CEO of聽the Tech Growth Factory said perfect rarely existed in investment circles.
‘My wife was having cancer treatment when potential investors said no’
鈥淚 don鈥檛 believe anything is perfect in life,鈥� she said. 鈥淓ven if it looks perfect it鈥檚 probably going to change within 30 seconds. 聽You need to do your due diligence.
鈥淢ost investors are investing for a return and they care about that return. When push comes to shove they鈥檒l always come back to do that.
鈥淎t some point they鈥檒l have to vote and you better get them on the right day. I鈥檓 not saying they鈥檙e all poisonous because I don鈥檛 think they are but I don鈥檛 think there鈥檚 a perfect investor.
鈥淢y 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鈥檙e not just people who put money into your company, they鈥檙e 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.鈥�
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 拢2m, including 拢1m from Arete in 2022, and Teale said: 鈥淵ou 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.
鈥淲hile Sir Terry Leahy doesn鈥檛 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.
鈥淭he 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.
鈥淚f you come bearing gifts and scaling your business and it鈥檚 going well, you sail through those board meetings in 20 minutes, rather than four hours pouring through pages of reports telling you what you鈥檝e not done.鈥�
Sam Royle is the co-founder and CEO of SoSquared, which connects brands with influencers and has raised 拢300,000 and is looking to raise another 拢1m.
He told the Sanderson event that there鈥檚 a different appetite to invest in the US compared to the UK.
鈥淚 think it鈥檚 subject to the nature of my business being in the influencer and creator economy,鈥� he said. 鈥淚t鈥檚 not something that鈥檚 widely invested in across the UK.
鈥淚f 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.
鈥淲hen 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.鈥�
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.