05 Feb What are investors looking for in businesses today?
The recent success of the UK vaccine roll-out has sent business confidence to a six-year high despite January’s lockdown measures, lifting the hopes of service sector firms across the country that have been forced to close. As the vaccine boosts confidence among businesses and boosts the wider economy, now is the time for businesses to look to for investment to enable recovery and future growth. But, what are the prerequisites investors are now looking for in businesses that they are wanting to invest in?
Private investment is a vital catalyst for wider economic growth – with the UK’s high net worth community providing essential early indicators for the direction of wealth at a time where the distribution of capital is key. With a 12% increase in new businesses starting up during 2020 compared to 2019, 2021 is set to create some exciting investment opportunities for investors throughout the country and some that are sure to boost the wider British economy, with 44% of investors now looking to back UK-based companies rather than global firms.
Luke Davis, CEO of IW Capital, discusses the prerequisites that investors are considering when looking to invest in a business:
Covid resilience
“The ongoing pandemic has ravaged business up and down the country, but certain businesses have remained resilient and have adapted well to the pandemic and this is something investors are now looking for when assessing a business and will be a part of their future portfolio planning. A lot of SMEs across the country have shown true resilience to the pandemic, whether that be altering their business model, moving online or adapting their target market, the key thing for a business to be Covid resilient, is to show that their revenues have been unaffected and that they are able to weather the storm of a pandemic. A strong management team plays a key role in this and in helping a company navigate through unprecedented times, so it is key for a business to be able to show this when looking for future investment.”
Innovation
“There have been a number of companies that have used the pandemic to their advantage and have furthermore capitalised on this. Transcend Packaging is a great example of this and one that we at IW have invested in. Originally a packaging manufacturer, they were able to innovate their business to produce Personal Protective Equipment (PPE) at a time of national shortage that saw NHS, healthcare and social workers unprotected from the virus. This is something that investors are now considering when looking to invest in a company and something that attracted us to Transcend.”
Future facing
“For a business to be future facing they need to understand that the future is unknowable, but are able to understand the direction a certain sector is going. Look at retail, ASOS were able to understand where the sector was going to end up a long time ago and the pandemic has only sped this up, forcing the closure of some of the biggest names on the high street. Ubamarket, a revolutionary shopping app, understood the consumer’s desire to save time when shopping and therefore created an app that allows customers to pre prepare their shopping list, which it then rearranges in the order that the items are displayed in the store, allows you to scan the items as you shop and check out with mobile payment. These are great examples of future facing businesses and are something that we look for when adding to our portfolio at IW.”
