So, you have a nice little start up and you want to expand. It’s time to look for investors, right? Sure, investors can be very helpful not least because they have the money. Still, they aren’t always a good fit for a business, especially a new one. A lack of money isn’t a good reason to get on your knees and to start to beg for help. You can do just as well on your own. What, you think you are doomed? Well, take a look at the following and see the negative aspects of investors. It just might change your opinion.
You Won’t Get Investment Anyway
Sorry to burst your bubble, but investors don’t hand money out to anyone. They certainly don’t hand it out to new businesses with no street credit. Investors make their money by playing safe. They contact the firms they know make money and invest in them because they’ll get a solid ROI. Small businesses are too much of a risk even if there is more potential. It is pointless wasting your time because you will only find rejection. Lots of them are willing to invest in giving you a reason why they you aren’t worth their money.
You’re Selling Ownership
The classic model for investors is to give money for equity of the business. It is a smart move on their behalf, and a silly one on your behalf. You are losing a lot more than you are gaining by giving out shares. Essentially, you are giving them control, and you can’t trust them to do the right thing. There has been quite a few financial advisor negligence claims in the past for this very reason. And, there will be plenty in the future. Once they have a foot in the door, they will do anything to protect their investment. If you are on their side you are fine, but once you are on the opposing team they will crush you like a fly.
They Are Your Boss
Owning a business is very freeing. You are the boss and no one tells you what to do – you make the decisions. Of course, that is as long as you don’t have investors. They might not take the title of ‘your boss’, but the elephant in the room is hard to ignore. Let’s face it, you have to keep them happy. If you don’t, they will happily walk away with their money. If you rely on said money, you are up a certain creek without a paddle. Investors hold a large amount of power in any business and you have to deal with this if you say yes.
Money Doesn’t Mean Much
Sure, money means you have a small business you wouldn’t have had otherwise. It also means you have the opportunity to make a lot of money. What the money doesn’t mean is that you have cracked the industry. All you have is a shot, and a very limited one. At the end of the day, you are giving up a lot of freedom and equity just for the chance to make money. When you see it like that, it is often better to look for alternatives. Even if you make money the company you dream of won’t exist.
Not all investors are bad, but you should know they are not all good before you sign on the dotted line.