Investors invest to achieve some level of financial return on their investment. In this sense, the business must have the ability to deliver the return expectation or at least present such evidence. Investors are likely to first check and validate that there is a market opportunity, that there is growth, and also that the business (the team) can actually take advantage of the market opportunity to be profitable. The management team is crucial and must prove to have the capacity to run the business successfully to deliver the target returns.
How do you decide on investment options?
The stage of a business is likely to influence its potential sources of capital. For example a start-up or early-stage business is likely to only source capital from family and friends and then subsequently from Angels or VC investors. As the business case is proven over time and cash flows become more stable (derisked) the ability of the business to raise bank debt, other private equity and even public equity (by listing on the market) is enhanced. Essentially, one must have a good view of their current circumstances to be able to successfully raise capital from the right sources.