The small business, Lost My Name, recently made headlines on Dragons’ Den after securing the largest deal in den history, departing with £100,000 in exchange for a 4% stake of the company. The deal highlighted the importance of choosing the right investment for your business. This blog sets out a few things to consider if you’re looking for investment your business.

Just as every business is unique, so is every investor. Whilst you must demonstrate what distinguishes your product(s)/service(s) from its competitors, likewise an investor must demonstrate what they can add to your business.

According to Piers Linney, the Dragon who invested in Lost My Name ‘what you are bringing to the table [as an investor] is providing advice and the ability to raise the business.’

It is important to match your desired aims with those of the proposed investor. For example, despite Linney having no previous experience in the digital publishing sector, he had extensive experience in constructing a successful marketing campaign; this being an area that was being neglected by the co-founders of the business. Their aim was to increase the commercial opportunity for the product, making Linney the ideal investor to help them achieve this.

The deal also raised an important issue regarding the possible conflicts that can arise when introducing a new investor into the structure of an existing business. In this case the involvement of current shareholders prevented the co-owners of Lost My Name from immediately accepting Linney’s offer as they had to agree his conditions with the existing partners. Fortunately for them, this posed no potential issue, however this may not always been the case. If you are looking for investment, it is important to establish clear boundaries regarding the role of any existing investors in advance of seeking new ones so as to avoid any potential conflict.

Finally, it is important not to underestimate the importance of involving a solicitor at every stage of the investment. Negotiations and documents can be lengthy and complex and it is important to seek the right advice at every stage of the investment.

For further advice on business investments please don’t hesitate to get in touch with one of our experienced business solicitors.

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