With the rise of startup businesses that have achieved success through venture capital, investment fundraising is quickly becoming a new small-business trend. However, this method of funding might not be ideal for every business. Whether you’re set to receive funds from friends and family (also known as angel investors) or professional investors (referred to as venture capitalists), it’s important to make a calculated decision. Plot out the pros and cons to determine if investment fundraising is best for your business.
Pro: Speeding Up Your Growth
Investment fundraising accelerates your business growth. You can likely build, expand and compete faster and more widely than other startups when you have more money on hand. Businesses without venture capital may be slower to achieve the same success if they have less funding to work with.
Con: Losing Equity and Control
When accepting venture capital, you sell a portion of your business. This means you no longer wholly own your company and are also giving up an element of control to your investors. As an entrepreneur, you may have ventured into the small-business world for the freedom to do what you want, when you want. Investment fundraising means you might have to give up complete control in future decision-making when it comes to your business.
Pro: Expanding Your Network
If you align your startup with professional investors, they can often gift you with their mentorship, industry connections and advice, in addition to financing. When you’re just starting out, this type of support can often be more valuable to your business than money alone. By granting investors equity in your business, you can also set the stage for access to an invaluable support network.
Con: Required Investment of Time
Investment fundraising involves a significant commitment of time and resources. In the early stages of entrepreneurship, this is valuable time that could also be used to build other elements of your business. Some entrepreneurs have even gone on the record saying that fundraising is often a full-time job in itself. As you start your small-business journey, determine where you’d rather allocate your time in the all-important early days.
Pro: Early Recognition
When compared to bootstrapping, investment fundraising in today’s small-business world is highly regarded. Having high-profile, successful investors buying into your business can help you, in turn, build reliability as well. This achievement may pave the way for you to attract new clients, employees, and media coverage early on in your business journey.
Many new business owners fall victim to seeing successful investment fundraising as a badge of honour; they often garner both media and industry attention. While it sounds glamourous, raising money is not the only determinant of a successful startup. As a busy entrepreneur, make a calculated decision. Before you devote the majority of your time to investment fundraising, weigh the pros and cons to determine if it’s the best step to take for the unique needs of your budding small business.
Michelle Novielli | Contributing Writer