Think You Need Investors? Here’s 3 Reasons Why You Probably Don’t.
Mo’ money, mo’ problems.
We’re so quick to ask for money but so slow to explore other ways to reach our business goals.
There are a few ways to justify raising money for your business. For intermediate entrepreneurs, the idea that its better to “always use other peoples money” may sound clever, but it really isn’t a sophisticated approach.
Getting a loan isn’t much better either.
“Small businesses don’t fail for lack of capital. They fail for lack of brains. They fail for lack of effort. ” — Mark Cuban
While raising money can be a necessity for some, I presume most don’t actually need investors to help grow their business.
I’d like to address the things most of us don’t think about when it comes to bringing on investors. Here are the top 3 reasons why I think you shouldn’t be in a rush to raise money.
1. You can loose it all
When you bring on investors, they’ll most likely become your board members. Board members are just a fancy way of saying “your bosses.”
And of course, what does it mean to have a boss? It means you can get fired.
When it comes to the idea of having a boss in a company you help built, it’s even worst. Having board members means you can get fired from your own company.
Even if you have a great attorney to look over any agreements, that’s not the point. Many investors won’t invest unless they agree to terms that helps manage their risk anyway.
Most of the time, you’re going to have to just sign the agreement and hope your investors won’t be too hard on you.
2. You can’t truly innovate
When you first get started building your company, the possibilities are endless.
The future is uncertain but it’s entirely in your hands. You make the rules and you decide what is the next move.
When you bring in strangers to your business, the future of your company isn’t directed by you anymore. So you better be sure these guys share your vision.
In a pre-funded startup, you’re free to make mistakes. You’re free to experiment. After all, you’re not responsible for someone else’s money.
If you love to try new things and take risks on ideas that may not work (as you should), having investors is going to feel like living in your parents house again.
3. You’ll need a great attorney
How can you afford a great attorney if you can’t even afford to fund your company? There may be ways around this. But it’s not easy — at all.
Some attorneys may do equity deals for their efforts but most won’t even consider it.
Sure, you can raise money and then hire attorneys, but by that time, it might be too late. You probably already sold your soul.