SEPARATING FACT FROM FICTION: 3 MAJOR INVESTMENT OPPORTUNITY MYTHS DEBUNKED
There are a lot of myths that have kept entrepreneurs and business owners from reaching optimal success. Some of the most common myths involve the topic of investments. I hear a lot of young entrepreneurs that refuse to go out and take advantage of investment opportunities simply because they are under the wrong impression of what brought on an investor really means. A lot of entrepreneurs have taken on false ideas like they’ll lose control of their business, a high valuation is the only thing that matters or investors can’t really add value to their company. Well, I’m here to tell you that none of that is necessarily true. Today we’re debunking these myths once and for all.
LOSS OF CONTROL
One reason that a lot of entrepreneurs are hesitant to bring on investors, whether private or venture, is that they are afraid that they will lose control of their business by giving up equity. This is not the case. Now of course, if you go shop out 90% equity of your business you won’t maintain control. But if you strategically bring on the right investors at the right time, you won’t run into this issue. Remember, no one is forcing you to do the deal or surrender control. Stand your ground and don’t accept a deal that is not in the best interest of your company. There are thousands of investors out there, so don’t settle just because you met with 2 or 3 investment groups and you couldn’t come to a deal that you are comfortable with. Keep shopping around. Build up your negotiation skills. Toughen up a bit. Become a shark or you will be eaten alive.
VALUATIONS ARE ALL THAT MATTERS
Valuations are undoubtedly important, but this isn’t the only factor that investors look at. If you make the mistake of going into negotiations and the only thing you have to offer is a high valuation, you’re going to be in bad condition. The best deals are not only priced fairly but also are built on common goals. There’s nothing worse than partnering with an investor-only to find that they know NOTHING about your business or industry. You’ll end up getting the short end of the stick if you don’t take the time to establish that the investor is a good fit for your business. Establish that the investor has knowledge of your industry and truly understands your mission will also prevent problems for you in the future. If you’re partnering with an investor that does not truly understand your company, they may have unrealistic expectations and when things don’t go as they thought it would, the partnership is likely to go sour.
PRIVATE INVESTORS DON’T ADD VALUE
The idea that private investors don’t add any value is not always the case and is a bad generalization that can end up costing your company in the long run. The truth is many investors actually have real operating experience. Think about it, most investors had to work to get to the point where they can actually invest in others. A lot of them did this through the building and operating businesses of their own. Now, if you define value as micromanagement, then yea you probably won’t receive much of that. But, what investors can do is bring an objective view to the table and challenge management to think outside of the box. Also, being that investors typically invest in multiple businesses, they can quickly recognize patterns and stages that may take an in-house management team a little longer to identify. Not to mention, investors can also put you in connection with a new network of people that you can utilize along the way. Growing your network is more valuable than any dollar amount that someone can put into your business.
Taking advantage of investment opportunities when the right ones come your way can do wonders for your business. Don’t let a couple of idiots that couldn’t negotiate the right deals deter you from getting the funding that your companies need. Let go of all the myths about investors and go out and do what’s best for your company. Obtaining investors just may be the “game-changer” in your company.Share: