Expectations come along with investment dollars.
By Jen W. O’Deay
When a company starts exploring first-time investment in the form of equity, seasoned entrepreneurs might see it as a rookie move. Veterans understand that dreamy notions disregard the realities of capitalization: There is no such thing as free money; there are always strings attached.
“The idea of accepting expertise and a big check from an outside investor can seem like a complete win for you and your business,” says Rich McIver at www.BPlans.com. “[Deciding] whether it’s (receiving capital from investors) actually a benefit for you requires your being aware of what is expected of you and what tradeoffs you’ll need to make in exchange for the dollars.”
First-timers need to pay close attention to what will never be in any contract (not even in the fine print) and carefully consider the unsaid:
• Accepting outside money is a consequential move.
• Funders will have expectations in return for lending you money.
• Feeling pressure, both from funders and self-imposed, is highly probable.
The key, says Michelle White, founder of nutritional supplement company Michelle’s Miracle, Inc.®, is to understand what you’re getting into.
White describes her process of bringing investors on board for Michelle’s Miracle as less than ideal. She admits in hindsight that, in lacking knowledge and experience, she agreed to “completely unreasonable expectations” that resulted in “paralyzing” stress when she couldn’t deliver.
Funders aren’t sympathetic to your personal or business circumstances. “It doesn’t matter what’s going on with you or your company,” White says. “They (investors) want their money.”
Can investor relationships work? Of course, so long as the unsaid is understood: There’s no such thing as free money. Expect expectations, and be prepared to deliver. And remember that there’s no such thing as stress- free money, either. Plan accordingly.