British businesses could be missing out on the funding needed to scale up because of misunderstandings in what investors want, according to a new report published by Innovate UK, the government organisation providing advice and loans to SMEs.
Innovate’s new survey ‘Scaling up: the investor perspective’ compares the views of investors and small to medium-sized enterprises on the factors for success.
The report finds that business leaders consistently underestimate the value investors place on ‘softer’ aspects such as chemistry, communication, adaptability and resilience.
The importance to an investor of a potential timescale to exit was overestimated by businesses, as well as the industry or business model fit with any existing portfolio.
Both investors (96%) and businesses (82%) had a similar level of agreement that a strong management team is the most important ingredient for scale-up success. They also agreed that drive and passion were the top qualities.
It follows that almost all (97 per cent) investors agreed that a weak management team was the number one deal breaker. Three-quarters (74%) of investors admitted they have actually turned down an investment opportunity based on gut feeling.
Chris Wade, venture partner at Octopus Ventures, said: “A strong team can build a company, but a weak team – even with a brilliantly compelling idea – wouldn’t be one for us to invest in.”
You can find out more about the report by visiting www.gov.uk.
Find out how to apply for Innovate funding.