How to Make Sure You’re Choosing the Right Investment Partner for Your Business

It’s never an easy decision to allow another firm to share in the strategic direction and future success of your business. If your company is like your child, as they often are, then choosing the right investment partner can be like a marriage. You need to know what works for you and ensure that you can hit the ground running and maintain good relations well into the long term, to secure both the longevity and success of your business.

Whether you’re a startup looking for venture capital investors, or an established company considering private equity, we’ve put together some considerations to help you make the right decision about your company and its future investment partnerships.

Before seeking out an investment partner, it’s vital you that know what you’re looking for. While investment can provide you with capital, contacts and resources to help your business grow, it ultimately comes down to one person to make the company attractive to investors – you.

That takes more than just some glossy collateral. To start on the right foot, jot down the answers to the following questions:

A realistic and thorough assessment of your business will demonstrate to potential partners that you possess honesty and integrity. It will also give you a clearer picture of exactly where your business is at and what you’re after. From here, you can begin investigating potential candidates for partnership.

In some cases, businesses will be approached by investment firms, and in others, it may fall to you to seek out opportunities for the business. In both cases, it’s better to have a shortlist of suitors so you can make an informed decision. A potential candidate should be able to:

When creating and culling your shortlist, be sure to include other stakeholders in the decision-making process. These could be managers, important vendors, mentors and other investors. Their opinions and insight can prove valuable in a collaborative effort to pin down what’s best for the company.

You need to know exactly what each potential partner is about. While it’s great if they provide all the information up front, you can’t necessarily rely on every firm or candidate to be 100% honest. A combination of online research and reaching out to your existing industry networks should help you paint a better picture of each candidate.

Look at:

Profits are only half the picture. You want an investment partner that will help your company flourish, but how they do it is also important. Inc.com uses the example of Dr. Edward Goldman, President and Chairman of MDVIP, a company that provides bespoke medical services to select clientele. In order to ensure his company found the absolute best investment partner, Goldman conducted several interviews with prospective companies to find a firm that could “offer assistance without interference”.

What kind of working relationship do you want with your investment partner?

A firm that is hands-on, heavily involved in the day-to-day operations of the company, or a potential partner who is happy to take a back seat in operations and focus more on the bigger picture and long-term strategy?

To answer this, consider conducting interviews of your own to find out exactly what each potential partner sees as their role in the partnership.

It’s common to hear the terms venture capital and private equity used interchangeably. It’s important to know that they are actually separate but similar terms.

Firms that specialise in venture capital are looking for younger businesses in the initial phase of their startups. They provide capital for new ventures. They are better at providing advice to new teams.

Private equity focuses on established companies looking to grow or develop their existing products and client base. Private equity firms are usually better at working with established teams.

This small but important distinction can be vital to choosing the correct partner. For example, if your business is already established with a track record of success, you’ll want a firm that specialises in private equity, not venture capital.

You’ve already established what you are after, but it also pays to know what investment firms are looking for. Anacacia.com reports that private equity firms typically look for the following criteria in potential business partnerships:

Can your business meet these criteria? Even more importantly, can you prove it? Anticipate the needs of a potential partner, and you’re already on the path to success.

Getting along and possessing shared values is important for any partnership. When it comes to choosing the right investment partner, you’ll want to counterbalance that with a variety of strengths and skills. While it’s good to have some overlap to help find common ground, if the firm operates with a team too similar to the current company leadership group, you’re building extraneous redundancy into your strategy. If you see too much of yourself in a potential investment partner, it might be time to look elsewhere.

Once you’ve done your due diligence and settled on a candidate, you might consider a trial run before signing contracts. Conduct a C-suite meeting with someone from the investment firm present, or go to them for advice on a particular challenge that meets their skillset. It’s as much about them as it is about you, so be open to the possibilities, and make decisions that will benefit your brand. After all, your company comes first.