Are you ready for a private investor?

 

As an entrepreneur, you may desire a high level of involvement in the new business that will commercialize your technology. Take the time to stop and ask yourself if you are ready to accept an investment from outside investors.
 

This list was prepared by a venture capital investor as items for an entrepreneur to bear in mind with respect to equity investments. Most considerations on this list also apply to angel investments, as well as those from family and friends. Ask yourself if you are prepared to:

• give an outside investor an ownership position (and a potentially controlling interest) in your company?
• provide an outside investor with one or more seats on the board of directors?
• treat an investor as a partner in your business?
• develop a list of special issues that are significant to your business?
• investigate whatever is necessary in order to address special issues regarding your business?
• spend time with an investor to discuss all aspects of your business? 
• let go of some of the emotional involvement you may feel as the founder/owner of your business?
• accept that future decisions may require discussion and negotiation with others?
• have a comprehensive business plan prepared?
• potentially be replaced as the CEO of your business?

If you conclude that you are willing to accept investment from and work with an outside investor, you can move to the next key issue. Consider what types of financing and how much financing you have access to based on your track record and your collective personal assets (including those of family, friends and contacts). Ask yourself the following:

• Do you or your family and friends have available cash that you can use for the initial financing of the business? Are you and they willing to risk those assets as equity investment in a start-up?
• Do you have a strong relationship with your current banker (business or personal)?
• Are you willing to pledge personal assets as collateral for a loan from a bank or financial institution to start or grow your business?
• Are you known in the venture capital and/or angel investment communities? Do you have a deep network of contacts that can assist you with warm introductions to these groups?

After contemplating these questions and determining whether or not you’re ready to move to the next stage of developing your business, you’ll have a better sense of what kind of financing is appropriate for you. If you have established you are not ready to accept outside investment or are unable to access investor networks, a“ bootstrapping ” strategy may work for you.

If you are ready to accept outside investment and believe you will be able to access sufficient financing from outside investors, develop a long-term financing strategy for your business that plans for equity investment and the use of debt to start and scale your business. 

Tags: equity, investors, raising-capital