4 Reasons to Avoid Investors For Your New Business

Alex Hamm November 7, 2013 0
4 Reasons to Avoid Investors For Your New Business

So…You Need A Little Bit of Money?

If you are flipping through this website, and clicked on this article, then I know who you are. You are an innovator and you have some great ideas that you know could become the next Facebook, Apple, or Google.

You are passionate, creative and energetic and you have the desire to impact the world and make a ton of money along the way. And that my friend, is admirable.

There are not enough people in the world who are willing to go out and create something special with their innovative minds, so those of us who do have what it takes, must stick together and never let go of our spirits.

That brings me to my next point.

I just finished reading Blake Mycoskie’s book Start Something That Matters. For those of you who do not know who Blake is, he is the founder TOMS, the shoe company that for every pair purchased, another pair is donated to a child in need.

TOMS has a very inspirational story and the book shares how the company managed to create an entire new business model, one that combines a for-profit model with a charitable cause.

Before TOMS, no one thought something like this would be possible, but Blake and his team have managed to make it happen, and I highly recommend you check out his book.

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Here’s The Problem…

Anyways, back to my point. Most people, when looking to start their own business, run into the same exact problem that so many others have already run into. That is, the money issue. You can’t start a business without money, and most people think the only option is to enlist funding from outside sources. Well, that just may be the worst decision you can make for your business idea.

Concepts ripped straight from Blake Mycoskie’s Start Something That Matters, here are 4 reasons why obtaining too much startup capital from investors is fatal mistake…

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1. It hurts your entrepreneurial spirits and creativity

Too much unearned cash in the beginning of a startup allows the people involved to get very comfortable. The beginning stages of a startup should be anything but comfortable. The fact that a company has unnecessary cash available is going to instill a lazy environment.

The startups that end up becoming a huge success are the ones that had to scrounge and find innovative, creative ways to make it work in the beginning. The fact that they had no money and they had some skin in the game forced them to hustle and use that entrepreneurial spirit to make their business work.

They had little money and limited resources so they had to find other ways to get by and survive.

And they did.

Think of Facebook and Apple. With little money in the beginning, both Zuckerberg and Jobs had to find creative ways to pull things together and get things done.

If you want to keep that innovative mind and creativity of yours that is necessary to make a business successful, don’t seek out an unearned sense of security. That’s what too much capital in the beginning provides; and unearned sense of security. Security is what tends to stagnate things and stop growth.

2. Seeking capital means you must please investors

When you have outside investors for your business, you are no longer in full control. They are pressuring you for profits and they tend not to care about your company’s values or your company culture.

You are obligated to please them and that will often times force you to go against what you and your company is built on; your values. 

Going against your values can be fatal to a company and it tends to drive it into the ground fairly quickly.

3. You lose ownership

Like number 2, not only do investors irritate you and disrupt your workflow and mission, but you literally own less of your company. Unless you are taking out a loan, then you are giving up a percentage of your company.

Don’t get me wrong, at some point, if you want to scale your business into something large, you will probably have to give up some percentage of your business in order to help it grow. But in the beginning, when you are small and just trying to get some traction, it’s best to hang on to as much of your company as possible.

Don’t go out and offer part of your company just to put your mind at ease with extra cash available.

4. You don’t need it

Bringing together all 3 points above, chances are, when starting a business, you don’t need very much startup capital.

If you don’t have much money to invest yourself, and it’s your first crack at entrepreneurship, you should be starting out small anyways.

Don’t try to do too much. Focus on serving a specific market with one specific solution.

That should be a small operation.

As things start to move forward and you get the ball rolling, then things will start to grow and you can evaluate the money situation again. But to start out, ask yourself, is it possible for me to get started with the resources I have available to me already?

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Quick Tip

These days, lack of cash is no excuse for not being able to start a business. With the internet, people have literally started companies with $200 in startup capital. It’s about putting in the hustle, and building the relationships necessary to make up for your lack of funds.

Get creative and make something happen!

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Check It Out!

Learn the 7 mindsets you must embrace to attract wealth, become a social superstar, and translate success into all areas of your life. Click Here==> The Dirty Little Secret…

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