Finance · 9 May 2022

Five Attributes to Look for in Early-Stage Investors

Last year proved good for investing despite the uncertainties of the pandemic. UK government figures show that tech start-ups and scaleups received a record-breaking £29.4bn in funding during 2021, up from £11.5bn in 2020. However, increased funding does not mean that the initial “match-making” step of pairing start-ups with the right investors has become any easier.

It is an established fact that early-stage investing carries inherent risks for investors, but less attention is paid to the equal share of risk taken on by start-ups. Finding the right investor can be the difference between success and failure, so there is a lot to consider when selecting who to invite onboard. 

Here are five attributes that start-ups should look for in early investors:

Patience and flexibility 

The best investors have a long-term outlook. Unwilling to sacrifice future benefits in favour of short-term gains, they will encourage continued investment in growth and development, even if this means not turning a profit for several years. 

You should seek investors that are calm, open, and willing to learn new things. Avoid anyone who is narrow-minded, focused entirely on short-term results, or determined to impose their ideas on your company without considering alternative approaches. 

  1. Strong principles of governance
At the concept and pre-seed investment stages, it is important to set up good governance processes. This includes establishing strong company policies, accurately preparing accounts, and filing financial statements. Without these processes in place, it is very difficult to move to later funding rounds. 

You should look for investors who can help you consolidate and standardise your company’s management. Anyone with previous experience setting up governance processes would be a boon at this stage of business development.

2. Connections

Hiring staff is essential for growing a start-up, but it can be challenging to find the right people to meet your business needs. Furthermore, hiring the wrong people can have a very negative impact on performance and team morale. 

At this stage, having an investor with connections you can leverage pays dividends – even better if they take an active interest in recruitment and use their experience to help you vet candidates. Your investor’s network can also help you find everything from advisors through to your first clients, so it is always worth looking for well-connected people. 

3. Interest in going the distance


 
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ABOUT THE EXPERT

London-based investor and founder of Larnabel Ventures

Entrepreneur