The 3 Things I Always Look For When Investing in a Person

For as long as I can remember, my mantra as an investor has been this: I don’t invest in businesses, I invest in people. I'm a strong believer that it is people – not a product or service – who make the difference between success and failure. For that reason, when deciding whether or not to invest, I scrutinise the person behind the business far more than I scrutinise their product or service. 

So, in this article, I’ll share the 3 fundamentals I always look for when considering an investment opportunity. I hope that, if you’re looking to gain investment for your own business, these tips prove useful. If you’re able to put yourself in my shoes when approaching your next pitch, I hope you’ll have a much better sense of what you need to do to convince me that your company would make a worthwhile investment.

1. Understand the Person You’ll be Investing In

First – before getting into the nuts and bolts of the industry, product or service – I ask myself, is this person investible? Do they really have the capabilities to grow and develop a business? Do they have the charisma to attract the right team, and the people management skills to keep them? How competent are they in their understanding of the product and service that they are about to launch? 

While facts and figures about the business, the product and the industry undoubtedly have their place, many businesses succeed or fail simply based on the skills and passion of the person in charge. In order to make a sound investment, you need to understand that person. Your gut instinct can be very important here. If you’re not confident they’ve got what it takes, then I’m afraid they’re out of the running.

2. Make Sure They Have Experience in the Sector

Lots of people approach me because they have an idea, but they've never really had any experience with that particular industry or sector. For me, this immediately puts them on the back foot. While it may be possible for some entrepreneurs to jump from one sector to another, as an investor, the odds of success are not in your favour. 

In exceptional circumstances, I could be persuaded to back someone who’s new to a sector, but only if they’ve demonstrated outstanding skills in other areas. Otherwise, I only invest in people who have lived through the idea and worked inside the industry their business will be in – somebody who really understands both their specific market and the sector as a whole.

3. Look for Evidence of their Ability to Scale

For many business owners, a small boutique company with only a handful of employees could be all they need to have their desired lifestyle. I have nothing against that, but businesses like these do not make particularly attractive investments. One of the best things about investment is bringing a brilliant new product or service to the market, but don’t lose track of the core purpose of investment: it’s about making money, and so the desire and ability to scale a business is paramount.

So, I always look for evidence that an entrepreneur understands the challenges of scaling a business and that they are well-equipped to overcome those challenges. Of course, growing a business is a multi-faceted endeavour, but one make-or-break aspect of it is the ability to inspire a workforce. If someone comes to me for investment, I ask myself: can this entrepreneur build a brilliant workforce and motivate them to dig deep when times are tough? If I think they can, they have a great shot at getting an investment offer. 

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Overall, making successful investments is a difficult art to master, but the core of any good investment is an entrepreneur with the makings of a great business leader: they have the ability and charisma, they have a deep understanding of their sector, and they’re prepared to take on the challenges to scaling their business.

I hope this article has given you a better understanding of my decision-making process when it comes to investments. If you know what an investor’s looking for, you can refine your pitch to make it as appealing as possible. Good luck!

James Caan CBE

www.james-caan.com