Equity Financing

Unlike debt situations and/or perhaps capital advances made by you, your friends and your relatives, when seeking equity financing from any knowledgeable or sophisticated investor(s), you are in reality looking for a marriage. This is not a temporary involvement. It is a very serious matter, involving mutual responsibilities that quite often touch every aspect of the business venture on a daily basis.

Although not necessarily interested in running the business or even taking control, the investor must at every stage be persuaded and convinced that you are in fact protecting his investment and earning the expected return within the anticipated time period.

It is important that during the courtship you:

• Be realistic. Will this marriage work?
• Be prepared to accept the responsibilities of a functioning team effort and coordination with your capital partner.

You must be prepared to remain as flexible as possible. All too often, and quite naturally, the arrogance of long periods of hard work and sacrifice to create the product or service or merely to get it to this stage, results in what has been called “the badge of sorrows.” (Sure, I need the money, but I’m not giving up that much in ownership or control or accepting conditions like that for the money! I worked years without pay and at great sacrifice to my entire family to get here and we have a deal that can’t miss-it’s worth a bundle!)
That may all be true, but the capital source is usually in the business of making money. In business, the objective is to successfully invest your capital in such a way as to maximize profit at the lowest possible or reasonably acceptable risks.

This does not mean that you give up the farm. It does mean that you accept the reality, maintain a flexible attitude and thoughtful approach, and remain receptive to satisfying mutual needs and goals with a capital partner.