This article is by Rami Cassis, founder and CEO of Parabellum
At some point in most businesses’ lifecycles, external investment becomes a necessary and natural next step. But the CEO-investor relationship is, of course, pivotal in deciding whether securing external funding drives growth or not – and this is especially true when the investment comes from overseas.
We’ve seen high levels of foreign investment flow into British businesses this year. A string of high-profile acquisitions by overseas firms – of easyJet, Segro, Unilever, and Schroders, to name a few – has generated a lot of coverage, but not all of it has been positive. Some of the headlines around this influx of overseas investment have been critical, branding foreign investors as vultures and raiders.
That’s a mischaracterisation, though. International investment is broadly a positive thing, and not something for businesses to fear – as long as CEOs and investors manage the relationship properly.
Capital alone does not guarantee expansion. Growth investors cannot just be viewed as a bank of funding; to make the most of the partnership, a surface-level understanding of the business, its people, competitors, and culture won’t do. If CEOs want to transform their company, they must work to identify the best investor for them, create an open and honest channel of dialogue with them, and view them as a proper part of the company’s next chapter.
That must start from the very beginning of the process, when it comes to selecting the right company or individual. An investor minded towards true business growth will want to be hands-on and develop a deeper understanding of the business – which makes it far easier for executives to spot which potential partners want to truly grow their organisation.
From there, CEOs and owners must fully pull back the curtain on their business. Investors back organisations expecting that an injection of capital will make them more productive and increase their ability to seize opportunities that were previously out of reach. But this is not achieved overnight. It might require tough, strategic decisions about which customers to prioritise, which markets are ripe for expansion, what the best hiring strategy is, or even what the longer-term management succession plan is.
A growth investor cannot set a business on the path to expansion without getting a comprehensive understanding of all aspects of the company. It has to go beyond just providing visibility of the business’s balance sheet, too. It must go further: letting them meet your longest-standing clients, for example, and perhaps even the clients that have left you for one reason or another.
It’s also about establishing a mutual understanding of each side’s own working styles. The good, the bad, the personal; the investor needs to see it all if both parties are to make the most out of the partnership.
This is important for any investor, but it is especially true when the individual or firm operates across international borders, because foreign investors may not have the wealth of local context that a CEO or business owner does. Client relationships and expectations, employee benefits and working hours, and business cultures can differ across geographies – as can regulatory environments.
Overseas individuals are less likely to have a full picture of local marketing and GDPR practices, and the area’s legal nuances, for example. Any and all of these areas can be major factors in deciding where and when to deploy growth capital – it is only through open dialogue that CEOs and investors can get on the same page about strategy, and make the most of each party’s expertise.
Foreign investors bring capital, a wealth of knowledge, and an external perspective to the businesses they invest in, but they need a transparent, collaborative CEO who has spent years operating the business if they are to put all of those skills and attributes to work.
Constant, open communication does not mean going to play golf a few times a week. It means sharing information and giving investors a view into the unpolished sides of the business – taking an honest, critical approach that genuinely moves the company forward.
It’s in all parties’ interests; smooth, open, and understanding CEO-investor dialogue is fundamental to putting growth capital to work and delivering returns on foreign investment. As international funding flows into the UK, that must remain a top priority.