A recent speech by business secretary John Hutton encouraged investors not to see ‘risk’ as a four-letter word.

Investors are nonetheless still treading cautiously, as the economic slowdown and credit crunch run their course. 3i recently announced that it would no longer invest in early-stage technology and media companies. Understanding and addressing investor caution is key if you’re looking to secure investment successfully during a downturn.

Countering caution starts by showing investors that you understand the effects of an economic slowdown and are willing to work within the constraints it places on them. Instead of aiming to secure investment within your original timescale, consider adjusting your timescales in line with cautious investors’ expectations. Investors need to be reassured that you have a sound understanding of the wider business environment in which they operate and are able to adapt your growth strategy accordingly.

If you ever watch ‘Dragons’ Den’ or ‘The Apprentice’ you’ll know that pitching for investment is as much about the investor as it is about you. Cautious investors need to be able to envisage a return, so approaching them with evidence of stringent financial management and demonstrable, realistic forecasts will address this.

An investor, particularly during cautious times, needs confidence that your business has the cash it needs to see it through difficult times and can take advantage of any future upturn. Healthy profit margins will show investors that you know how to run your business and will encourage their confidence in you, even if your sales volumes are small. 

A regular review of business terms will help your business be more flexible and prepared for a downturn. If investors can see that you have safeguarded long-term cashflow through your terms of business, it can make your company more attractive.

As investors are being more cautious, demonstrate your awareness of their needs, focus on your finances and be flexible.

Glen Hopkinson is managing director of Connect Yorkshire , a not-for-profit organisation that helps young businesses to secure investment and is part of the national Connect network.