Why you should treat getting business investment as carefully as getting married

I would not want to upset my wife by suggesting that deciding which investor to choose for your business is as important as getting married. But certainly, if it does not work out, a wrong decision can be as expensive and nearly as traumatic as a nasty divorce. What is more, you don’t have the luxury of a period of cohabitation before tying the knot to test out your compatibility. Once you have signed that Shareholders and Subscription Agreement it is too late.

 

Yet in my experience of 25 years of investing, very few entrepreneurs ask good questions before they accept investment. This may be because of the perception that equity is hard to raise and that the power is therefore with the investor. But giving that impression is in itself a mistake. Good questions, and careful due diligence, make a successful outcome more likely because they make clear to potential investors that the entrepreneur is switched on and has alternatives.