The investment special - series 2

SERIES 2 

What to expect from an investor on your board 

The job of an investor as a Board Director is to constructively challenge and support the management team, whilst looking after the interests of the shareholders. They should be ready to help you with the governance aspect of the business and be there to support you both in and out of formal board meetings; most of their utility will be outside of a formal board setting.

Nothing in a board meeting should be a surprise to the investor, anything important will have been discussed or relayed to the board prior to the meeting. An effective board meeting is one where discussion centres around constructive solutions to ongoing issues/opportunities, not a missed margin two months ago. Be vigilant during legal negotiations of funds looking to take inappropriate levels of control (i.e. consent / veto rights) or put in place measures that would hamper the ordinary course of business; whilst of course they have to expect a significant level of influence and access to information, they may well only be a small minority holder so a balance must be struck.

Be brave in asking searching questions when selecting your investor. The relationship you’re about to enter into is as important as a marriage.

Types of investment 

Bootstrapping

Many entrepreneurs start by self-funding their business, using personal savings or income. This approach allows you to retain full control but may limit the scale of your initial operations.

Friends and Family

Close friends and family members can be a source of early funding. Ensure clear terms and agreements to avoid personal conflicts.

Angel Investors

These are individuals who invest their own money in early-stage businesses in exchange for equity. They often bring industry experience and networks that can benefit your startup.

Venture Capital (VC)

Venture capitalists invest larger sums in high-growth startups in exchange for equity. They typically seek businesses with significant scaling potential and may require a more substantial stake in your company.

Crowdfunding

Platforms allow entrepreneurs to raise funds from the public. Crowdfunding works best for consumer-facing products with mass appeal.

Small Business Loans

Traditional loans from banks or government programs provide capital without diluting ownership. However, they often require collateral and repayment plans.

Private Equity

Private equity firms invest in established businesses looking to scale or restructure. They provide significant capital but often seek control or influence over company decisions to drive growth and profitability.

It is important to consider what type of investment best suits your business at the time of raising. Being a start-up, seeking private equity funding is probably not the best option for you and your business is likely to be less attractive to a PE than it would a VCT. In the first instance, having your own capital to get your business up and running is likely to set you on track to success and further investment down the line.