When asked about the best ways to raise money, many entrepreneurs will skip right to the investor funding. But is that really the best option? True, an angel investor or a good team of investors can get you capital to really take off, but what should you watch out for? In this article, Scott Crockett with Everest Business Funding will go over five reasons why going for investor funding shouldn't be your first choice.
Your Dream May Become Someone Else's
You might have heard that angel investors can get you off the ground. Keep in mind, however, they have a stake in your company once they invest, which gives them a certain level of control over your business's future. Eventually, they may end up being your de-facto boss. While it may seem unlikely and maybe even irrelevant to somebody desperate enough, the reality is that it's much easier to lose control than it is to get it back.
You May Be Able to Reduce Expenditures Elsewhere
While investors can get you a lot of money, you might not need it if you're frugal with the money you already have. As mentioned previously, investors have a lot of influence over your business, something you can avoid if you never need them in the first place. You can save money in many ways, including cutting out buying snacks, eating out, subscriptions you don't need, and other expenses. You will be surprised how much money you're wasting on things you never needed in the first place.
Market Validation Is More Important Than VC
Say you get the money you need, the investors are with you all the way, but then your business fails? You can spend all the money in the world, but if your idea is not what the market is looking for, then it's not going to work out regardless of how much funding you have. Going without VC means your business will succeed or fail based on its merits alone, instead of being dragged out for sometimes years past its real expiration date.
Bigger Doesn't Always Mean Better
Growing your business too quickly is dangerous. You may end up becoming unable to respond to changing market conditions effectively or never take advantage of the market at all. As you grow, your operating expenses will increase. Without cash flow coming outside of the investors, you massively increase how much you have to make initially to be successful.
The Time Spent Fundraising Is Often Wasted Time
All that time you've spent going through the long and complicated seed funding process is entirely wasted if you don't get accepted. That process can take anywhere from months to even years. It is very often better to just focus on getting your product to market using funds acquired elsewhere.Follow these tips, and you may find that you didn't need as much money early on as you once thought. Scott Crockett, Everest Business Funding's CEO, knows better than anybody about properly raising money without the need for investors.