British business owners are missing opportunities to scale up because they lack understanding of what investors are looking for.
This is according to a report by Innovate UK, which found that business leaders underestimate the value investors place on “softer aspects” of the business. For example, 84 per cent of investors consider poor communication to be a deal-breaker, compared to just 46 per cent of business owners.
Around 87 per cent of investors also listed softer skills like adaptability and resilience as a deal-breaker, compared to just 58 per cent of business owners, and 78 per cent of investors said chemistry was important, compared to just 53 per cent of owners.
However, there is one thing both investors and business owners were in agreement on – the need for a strong management team – with 96 per cent and 82 per cent respectively saying this is the most important ingredient for scale-up success. Drive and passion were cited as the most important qualities.
Chris Wade, venture partner at Octopus Ventures, said: “I have been developing a 20-year thesis that nothing works out from a company pitch; their products or services always end up taking a different direction.
“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.”
Aside from softer skills, the report also highlighted a couple of other disconnects between an investor and a business owner’s understanding of what makes a good pitch: 70 per cent of investors felt cultural fit was a deal-breaker, compared to 50 per cent of business owners.
Additionally, only 55 per cent of investors felt it would be a deal-breaker if the business didn’t fit with the rest of its portfolio, despite 74 per cent of business owners believing this to be the case.