Choosing the right investor is one of the most consequential decisions a founder will make, yet it’s often approached with far less scrutiny than a key hire or a major supplier. David Pattison, business leader, angel investor and author, shares hard-won advice on how to build investor relationships that actually serve your business.

When you choose a business partner, a key hire, or even a supplier, you probably spend a lot of time thinking about whether they are the right fit — not just on paper, but in terms of values, pace, and what they want from the relationship.

Choosing your investors deserves the same care. Probably more. On so many occasions I have seen founders either intimidated by the investment process or so grateful to have money in the bank, that they never stopped to ask themselves whether the people providing it were right for them. That early relief can store up a lot of pain down the road.

Here are a few thoughts on how to work with your potential and actual investors.

Don’t take seed investors for granted

Almost every business begins the same way: with seed investment from friends, family, and what the industry affectionately calls ‘fools’ — people willing to back you before there’s any real proof of concept. These are often the best investors you’ll ever have.

They’re supportive, not demanding, and they tend to back you rather than just the business plan. Over time, as further investment rounds dilute their stake, it becomes easy to overlook them. Resist that temptation. They opened the door for you. Treat them with the respect they deserve and always give them the option to invest again.

Protect your equity — it’s the most valuable thing you own

Founders seem to undervalue their equity. It’s the most valuable asset you have. Nobody ever gets equity allocation right. Either too generous or too miserly. A share option scheme for employees can work well but most employees don’t really value their allocation.

One of the most common mistakes I see early-stage founders make is giving away equity too freely in exchange for sweat equity or trade help — office space, introductions, a bit of advice. It feels generous and fair in the moment. It rarely feels that way later.

If you’re going to offer equity for advice or resources, keep it small, consider using options rather than shares, and make sure the legal structure lets you get it back at a reasonable price.

Know what you want — and understand what they want too

Before you approach any investor, you need to be clear on what you need. How much money? Over what timeframe? Do you want someone active in the business or hands-off? These aren’t just due diligence questions; they’re the difference between finding the right partner and ending up with a difficult one. Have good answers before you walk into any room.

But here’s something just as important and far less often discussed: understand what your investor wants. Not just their headline return target, but what’s really driving them.

For individual investors is it a tax break before the year end? A genuine belief in the product? A desire to get ‘hands on’ involved? For institutions it is always about how much money they will make, but could also include investment in a sector, getting a fund fully invested.

Every investor is different, and no two have the same motivations. Knowing what matters to them helps you manage the relationship honestly — and avoid surprises later.

Do your homework — and don’t be intimidated by the big funds

Investors will carry out due diligence on you. Return the favour. Ask for references. Talk to the founders of other businesses they’ve backed. Find out what they’re like when things get difficult, not just during the honeymoon period. It’s not rude — it’s essential.

And when the institutional funds come knocking, don’t let their scale or confidence unsettle you. Funds can carry a certain ‘we own you’ attitude that some founders find intimidating. Don’t be intimidated. Be clear upfront about what you want from the relationship, agree it, and write it down. They need to invest — that’s their job, that’s how their model works. You have more leverage than you might think.

This is where the distinction between institutional and individual investors really matters. A venture capital fund must deploy capital — it has clients, a fund life, and performance targets to meet. An individual investor chooses to invest. That’s a meaningful difference in terms of how they behave, what they need from you, and how much patience they’re likely to have.

Take good money when it’s there

One piece of advice that comes up repeatedly from founders and advisers who have been through multiple funding rounds: if good money is available on good terms, take it — even if you aren’t actively looking. You never know what’s around the corner. A market shift, a run of bad debt, an unexpected event that puts pressure on cash flow. Money in the bank gives you options.

The key word, of course, is ‘good’. Don’t take money at any cost. But when the terms are right and the investors are right, don’t wait for a more convenient moment. There rarely is one.

In summary: Investors will come and go throughout the life of your business. The relationships you build with them — and the structures you put in place around those relationships — will shape the journey at every stage. Choose carefully. Ask the right questions. Know what you want, understand what they want, and never take anyone who believed in you early for granted.

David’s award-winning book is The Money Train: 10 Things young businesses need to know about investors. It’s a guide to preparing for the investment process from seed capital to Series A, with lots of real-world examples.