Confused about Business Investment...

Getting investment into your business can feel daunting, but it becomes far more manageable when you understand what investors are looking for and how to position both yourself and your company effectively. 

 

The first and most important thing to remember is this: investors want a return on their investment. Every decision they make is driven by whether they believe you can deliver that return. It’s easy to get swept up in encouraging statements about “growing together,” “supporting people,” or “aligning with their portfolio,” but the reality is simple — their primary metric is whether you can help them hit the return targets set by their investment committee. 

 

 

At a high level, they’re asking: 

 

These numbers vary across investor groups, so part of your due diligence is to find out their specific expectations. Investors focus heavily on whether your success is repeatable and scalable. For example, look at your current customer acquisition model: 

 

• How much does it cost you (in time, marketing, and resource) to acquire a customer? 

• What percentage of your sale price does that represent? 

• Can you refine or reduce this cost over time? 

• Do you have a plan to acquire customers consistently and at scale? 

 

Many founders assume most investment goes into R&D or product development. While that may be true for some breakthrough technologies—AI being a good example—most investment capital is actually used for scaling customer acquisition, often before revenue is even generated. Think of Facebook: millions invested to build a “free” user base long before monetisation through advertising. 

 

Most investors aren’t looking for lifestyle businesses. In this context, that means businesses that can’t scale. Another key factor is you and your team. Investors need to believe you have the skills and experience to grow both your business and their money. They will want some degree of control, often including a board seat, not as a hindrance, but as a way of monitoring their investment and providing advice, contacts, and sector expertise. They’ll examine your lawyers, accountants, developers, sales team, marketing approach, and overall strategy. Valuation is another major component of the process. You need to understand what your business is worth pre money— that is, before any investment. This is typically based on: 

 

• Customer lifetime value (your profit from a customer over, say, five years) 

• Forecasted future profit 

• Market comparisons such as price/earnings ratios in your sector 

 

You can then determine and negotiate how much equity you’re prepared to offer. But this is only the beginning. After calculating your pre money value, you’ll add the investment and forecast its impact on growth, which gives you the post money valuation. That number should be higher. Investors will often argue for a disproportionate share of equity based on the risk they’re taking — this is normal. You can negotiate using tools like preference shares, different voting rights, or staged investment tranches. 

 

 

Investors negotiate hard. They expect scale, repeatability, and evidence of traction. They want a strong team, a scalable business model, and a clear path to significant returns.