If you invite external investors to become co-owners of your company, both parties are taking on a deep commitment to each other. Directors have a duty to consider the interests of all shareholders. Owners of companies ultimately have rights to decide who is running it.

Everyone knows that investors will do their homework on you before they ever dream of parting with their cash; so you should be any different. Three of the UK's leading investors spoke to Entrepreneur Country to offer their own advice on the importance of knowing your investor:

"Number one, beware of the investor and this applies to everyone. You don't just have to be a start-up to be taken advantage of. Friends with multi-million pound companies have been shafted.

The investor has to check the entrepreneur and so why should an entrepreneur not want to check out someone is going to be taking a stake in his business. You need to know your potential partners not just as investors but the type of people they are.

It might be better growing organically than trying to take on investment unnecessarily or on prohibitive terms."

"You should be cautious about taking investment from people who don't know your industry area and/or are very inexperienced in these types of transactions.

Doing an investment deal is tortuous enough, but if the investor doesn't know what due diligence to do and is perhaps even unsure about making the investment, then the agony can be even more prolonged! Agree valuation, terms and timetable up front (subject to DD) and check up on the investor, preferably with the CEOs of companies the investor has backed before."

"No VC worth their salt will back you without checking everything down to the colour of your pyjamas. Yet they do lots of deals – taking their money into your company may be the only deal you ever do. So your due diligence should be even more thorough.

Do your research: what other companies like yours have they backed, what were the outcomes, have they made or lost money, how long do their funds have to run, are they here to stay?

Check your references: ring a few of the CEOs they have backed, both successful and unsuccessful, and find out what to expect.

Check out the individual you are dealing with as well as the firm – how influential are they?

Use the legal process to find out how they behave; do they play fair, or do they try to take unreasonable advantage. Or are they too soft? If you don't like what you see, make sure you can walk away."

Remember, before you reach a monthly breakeven position, it is shareholders that prevent a company from going bust by nurturing the company with their capital. High Net Worth individuals often invest in early stage 'high growth' businesses as part of an investment mixture that will be weighted heavily in more mundane asset classes. Their early stage investment selections are a higher risk bet and can be a source of interest and enjoyment, provided that the Board engages them fully in the unfolding story.

I guess that is the key; communication leads to better engagement- knowing your investor is critical. From the shareholders side, communication leads to more excitement, fewer unwelcome surprises, and insights with which to help make appropriate introductions. It is also an opportunity for experienced shareholders to feed in advice and suggestions.

From the Board's side, the communication leads to stronger support, more relevant introductions, more helpful advice and a common understanding of strategic direction. It is also difficult to represent shareholders interests if you don't know what is important to them. Failure to engage and communicate leads to disharmony. Of course, ultimately the Board may need access to further shareholder capital.

If writing to shareholders, they don't want an essay or just tables of numbers; they really want the narrative, the story behind the headlines that they can enjoy. They also like to see press coverage. A monthly 'one pager' newsletter or a regular phone round is rarely a wasted effort.

I have lost count of the times when a shareholder has come up with an idea or an introduction that has added real value. There is a fair chance they have invested because they have some knowledge of part of your sector.

So it is not quite a marriage, but it certainly has the like benefits of regular two- way communication.