Oliver Bridge explains the things entrepreneurs should watch out for when engaging with private equity investors.

I recently crossed over into the world of private equity, having come from a background in entrepreneurship. From a young age, I have run my own companies – starting with a mobile disco whilst I was at school, then an online footwear retailer (Biggerfeet.com) and finally an online gender search engine (Genderchecker.com). When I was at university I was involved with Oxford Entrepreneurs and for the last couple of years, helped run workshops at Silicon Valley comes to Oxford, an event which annually plays host to a wide range of high profile technology entrepreneurs from the likes of LinkedIn and Google.

In November, I joined Synova Capital, a private equity team based in Green Park, London. Synova looks to invest in businesses which are making between £1m and £5m a year in profit and where possible backs entrepreneurs and founders to help them grow their businesses further. Part of my role is helping identify which companies we should be talking to and meeting the management to determine whether we think the business would be a good investment for Synova. A lot of the companies I speak to are still run by the founding entrepreneurs, and it’s been an interesting couple of months: meeting different people and seeing how they approach the opportunity.

From what I saw in my time before private equity, entrepreneurs are an unusual group of people. They work slavishly on a single project – often in the face of great adversity, devoting all of their energies, resources and willing to something which might not make sense to others. Sometimes they can be blinded to the arguments against their idea, and seem to have a disregard for authority that can at times, border on unhealthy.

Investors are different. They, like entrepreneurs, also work hard, but they have a number of different opportunities which come across their desk and as a result, they have a lot of options about where they focus their attention. The initial challenge for anyone seeking investment is therefore to stand out and get noticed.

So what should entrepreneurs bear in mind when trying to engage with investors to enhance their chances of success?

· Make sure you pitch to the right type of investor. Angels and VCs typically are happier to invest in unproven ideas, whereas most PE investors will only consider established, profitable businesses that they can grow further – be that expanding internationally or growing the profile of the business. So, if you get a “no” – then don’t despair – it could be that you’re pitching to the wrong type of investor.

· If investors are going to enter into a deal without a controlling stake, then they need to be confident that they will be consulted with and listened to on any significant decisions which could have a material impact on the business. Not only is there a large amount of money at stake, but also an investor’s reputation, should anything go wrong. An entrepreneur that wants to hold onto their majority stake needs to convince investors that they will be a co-operative and understanding business partner.

· Investors speak with hundreds of different businesses every year and have lots of different options about where they direct their time and money. The best strategy for somebody trying to stand out from the crowd is to be pro-active – try to be quick to suggest dates for meetings, send information promptly and return phone calls as soon as you can.

· It’s crucial to be credible. A young, healthy and ambitious entrepreneur who claims their business is going to grow 50% next year but wants to sell all of the shares immediately is going to raise eyebrows – if there is so much money to be made why do they want out? Entrepreneurs should be prepared to commit financially to the future of the business when they sell – and may be required to ‘roll back in’ some of the proceeds from selling their shares, or commit to an earn-out. Entrepreneurs should expect this – investors want to protect themselves after all.

Most successful entrepreneurs are smart, empathetic and credible – that’s how they got to where they are. I also believe these are qualities which will stand an entrepreneur in good stead for dealing with an investor, so being true to your instincts should serve you well: put simply, it’s not a case of re-inventing the wheel.