“There are two things investors don’t like – surprises and uncertainty.”
That’s the view of Nick Horrocks, managing director and founder of Manchester-based corporate finance boutique X.O Advisory.
The experienced corporate finance expert says, other than birthdays, surprises should be avoided at all costs.
Speaking at TechBlast’s latest Going 4 Growth roundtable, Horrocks says good communication is key.
“Entrepreneurs have to meaningfully engage with their investors whether they like it or not,” he says. “They’ve got a responsibility to keep them informed. What investors don’t like are surprises and uncertainty.
“If you think you’re going to have a problem the key is to make sure they know about it and that you’re on top of it.
“Problems will exist all day, every day. You don’t want to burden your investors every time but they don’t want to find out when it’s too late.
“As an entrepreneur you might decide a particular product or strategy isn’t working and you need to pivot. If that’s the case, be honest with your investors and take them on the journey. If it’s not working say why.
“Plan B is waiting for your money to run out and if that happens everyone is left scrabbling around and wondering what happened.”
Horrocks previously headed up the Northern office of leading tech investment bank GP Bullhound. Prior to that he was a director at Clearwater International.
Horrocks says: “When I was at GP Bullhound we used to publish a lot of research about the sector. We would go around and identify the key points in the tech space back in the day. What’s incredible is the same points that were being raised then are equally important today.
“We work with companies normally to raise up to £5m. It’s seed to Series A and maybe a bit beyond. They’ve got to have a very clear vision of where they’re going. They’ve got to be ready to educate investors and keep educating investors as part of the story. Strong Governance & dialogue is a key part of that.
“The other point that keeps coming up is hiring. Recruiting the right people in that growth process is as crucial as it is accepting that you may not be the person to grow a business from £20m revenue to £100m.
“Hyper growth requires a funnel of people and almost a turnstile approach. There are people who are very good at growing businesses to a certain stage. The other thing that’s really important is data in forming the path and direction of the business.”