Selling part of the business.
WHAT AN INVESTOR BUYS
A share of future value.
WHAT THEY EXPECT
That the business grows substantially, and that they can eventually sell their share.
WHY THAT MATTERS
It determines which businesses suit equity investment.
WHAT SUITS IT
Businesses that can grow quickly and substantially.
WHAT DOES NOT
Steady businesses with modest growth, however profitable.
WHY
There is no route for the investor to realise a return.
WHAT THAT MEANS FOR MOST SMALL BUSINESSES
Equity investment is not appropriate, and pursuing it wastes months.
WHAT INVESTORS PROVIDE BEYOND MONEY
Relationships Experience Credibility Discipline
WHAT THEY REQUIRE
Information, regularly Involvement in significant decisions A path to eventual realisation
WHAT YOU GIVE UP
A permanent share of the business Some control Freedom to run it entirely as you wish
WHAT TO UNDERSTAND
That taking investment commits you to pursuing growth, not merely profit.
WHY
Their return depends on it.
WHAT TO ESTABLISH BEFORE RAISING
Whether that is what you want.
WHAT MANY FOUNDERS DISCOVER TOO LATE
That they wanted a good business, not a large one.
WHAT TO DO IF SO
Do not raise equity.
