Researching suitable investors for your business

Investors come in all shapes and sizes, and for any early stage business some will be a better match than others. It is worth devoting as much time and effort into researching the most suitable investors for your business as into potential customers or suppliers, agents or distributors.

One purpose of this Guide is to enable young company owners to see which organisations are already investing in Scottish companies, or are looking to do so. The listings of investors are intended to be a starting point for business owners to see the range of options, and the investing preferences and criteria of different firms, to enable them to research further possibilities against this context.

Some aspects to investigate are obvious:
• Does the investor have restrictions on market sector, or
geographic location? (Trade associations often have lists of
specialist investors, and Scottish Enterprise has the same for
its priority sectors)
• Will the firm invest pre-revenue?
• What are its minimum and maximum investment levels?

Others are more detailed:
• Does the organisation normally lead the investment?
• Does it regularly co-invest with others, and if so, who?
• Despite its stated investment levels, what is the pattern of its
actual investments?
• How many companies in its portfolio, and how many new
companies does it take on per year?
• What successful exits has the firm achieved?

Other questions will need to be put to the investor directly, or to an investee company:
• What connections does the investor have in your market
sector? How helpful might they be in opening doors?
• Can they help in putting a funding package together,
introducing other investors and debt funding?

Most investors say that they like to meet young company founders before the point where they might be negotiating terms; many of them have arrangements for meeting visiting entrepreneurs, and most attend some trade events and pitching competitions, so it is well worth making a shortlist of appropriate investors and trying to meet them personally well in advance of fundraising.

Investors pay more attention to proposals introduced by people they have worked with before (other investors, professional advisers, other company founders), so it is also worth exploring whether you have any connections who could make these introductions.

At the start-up stage, some investors (especially business angels) will guide a company through various iterations of its business plan until it has addressed the issues of particular concern, but only if the proposition seems inherently promising. Although there are many issues which all investors will need to see addressed in a business plan – chiefly the abilities of the management team, and how any missing expertise will be recruited – each investor has its own specific criteria, and working with a single investor through a number of business plan changes may limit the scope for taking it to others.