A newly published poll has revealed a divide between what entrepreneurs think startup and angel investors care most about when deciding whether to back a business, and what the investors themselves say really matters.
The poll of 3,000 business leaders, published this week by business data website Company Check, found that more than two thirds (38%) believed a business plan was the most important factor in any investor’s decision to back a company; above the idea, the founder or any previous sales.
In response to the question: “What do investors care most about?” 38% said they thought the people with the money cared about the business plan above all else, followed by 27% who said “the sales figures”, 15% who said “the founder”, 9% who said “the idea” and 8% who said “the economy”.
However the findings contradicted the responses of a number of high-profile investors – proven angels who, between them, have invested in dozens of early stage companies.
Rory Curran, an investor behind companies such as StatPro and Ecodesk, said: “Having invested in about 15 early stage companies – and seen some failures – my ranking would be founder, idea, then business plan; especially the technology, is it scalable or will it require substantial re-investment”.
Alfie Best, the chairman of Wyldecrest Parks and multi-millionaire investor, said: “Even though business plans and sales figures are in fact some of the most important aspects when considering investing in a business, when I invest in an established business, cash flow is the most crucial factor in my decision.
“Also, confirmed sales orders come just alongside it. However, if I’m considering an investment in a brand new business then the experience of the person heading it up and any other companies already on board to purchase their products are the aspects I evaluate first”.
Neil Austin, former head of global markets at KPMG and serial investor, said: “If I’m the main investor in a venture then I would be looking at the idea, the founder and the business plan, but the founder would be the most important.
“However If I’m investing alongside others and they’ve been there longer and invested more, the plan would still be number one”.
The poll was carried out on the Company Check website during August and September. Its users represent a cross-section of the UK’s business community, including owner-managers, senior staff and entrepreneurs.
Alastair Campbell, founder of Company Check, recently secured $1m of angel funding for his latest startup Carsnip.
He said: “The findings are really surprising because for most startup investors (at an early stage) that I know, it’s all about the founder and the idea first, then the business plan and sales figures later.
“This just shows the need for good communication between investors and the people who are trying to secure their backing. That way, future pitches can be more relevant to what the so-called ‘Dragons’ actually care about, more successful deals can be done that benefit both sides and more promising young startups can get off the ground”.