DO I REALLY NEED AN INVESTOR IN MY NEW VENTURE?

Accelerate your business with these tips on "Do I really need an investor in my start-up? Analyse and discover this TIP!

DO I REALLY NEED AN INVERTER?

The Business Angel (+) wants to see that you have convinced FFF to invest earlier... this increases the risk of your company a lot, in case of failure, in addition to the company you may lose your personal cornerstones Do I really need a BA? YOUR capital is like your house, when you give a share to a partner it is as if you were putting another person in your house to live... for life!!!

HAVE YOU THOUGHT ABOUT HOW TO KICK OUT A PARTNER YOU DON'T LIKE?

During the acceleration programme (+) we will make you think about the points described above and many more so that you can create your business successfully. If you are super clear that you need and want an investment partner, start 9 months before you need one. In the first few rounds ask for just enough to test the market, because then I'm worth more and I can get more money for the same % of capital in the next round. Be clear, "It is not necessary to have an investor in a new company". 

There are many ways to finance a new venture, such as self-financing. bootstrapping (+), on bank credit (+)loans from family and friends, the crowdfunding (+), etc. The choice depends on several factors, such as the nature of your business, your business plan, your ability to repay and your short- and long-term financial needs. It is important to carefully evaluate all options before making a decision and seek advice from financial experts if necessary. In the mentorDay acceleration programme you will learn to finance you from all sources (+).

IS IT BETTER TO LOOK FOR INVESTORS FOR YOUR START-UP OR TO START WITH YOUR OWN RESOURCES? 

It seems that nowadays success for a startup is all about getting investors first, what is known as 'raising a round', and then getting the right people to invest in it. sell the company (+) in a short period of time for a good amount of millions... and many people go down this road without fully understanding their options and, above all, their implications. With this in mind, I wanted to share my views and experience on trying to compare the two extremes that exist in terms of funding a startup (+). But there are actually many options in between, as we discussed in "Where, when and how to seek investment for my startup and even combinations of them". In any case, the first thing to do is to get rid of complexes and be honest about the reasons that lead you to create your company... because for the decision to be successful it is important to know where you are going and, above all, to be clear about what you want to be "when you grow up".

TO OVERSIMPLIFY IT COULD INCLUDE ONE OF THE FOLLOWING TWO OPTIONS:

1. LIVING WELL. If you are looking to set up what is called a lifestyle business, where you are your own boss, earn good money and can do what you love, you probably shouldn't be looking for investors for the following reasons.

"Less risk, less potential reward

2. BEING RICH. If you are ambitious and want to create a big company that leaves a big footprint, grows fast and where you can end up making a lot of money, or become the next Mark Zuckerberg, you will probably need a lot of capital to grow fast.

"More risk, higher potential reward".

In any case, bear in mind that one does not exclude the other, and that many companies start by financing their own business model (either through equity or boostrapping) until they are able to validate the business model and demonstrate that they have a business model. traction (+), and then look for investors (and let's face it, it's going to be tough: according to the Kauffman Foundation less than 1% of startups get funded by private investors. And the fact that a company has not raised investment does not mean at all that it cannot end up growing a lot or being bought by Google (the wet dream of many entrepreneurs). Just think of companies like Github, Behance, TechCrunch, Ernesto, Blogger (sold to Google) to get rid of many complexes. 

THE ADVANTAGES OF FINANCING A START-UP WITH PRIVATE INVESTORS ARE:

1. Access to more capital: private investors can provide more capital than friends and family.
2. Experience and knowledge: private investors often have industry experience and knowledge that they can bring to the company.
3. Networking: Private investors often have a wide network of contacts that can be useful to the company.
4. Decision-making assistance: private investors can be a valuable source of advice and support in key decision-making.
5. Access to resources: Private investors can often provide additional resources, such as office space, equipment and staff, to help fuel the growth of the business.
6. Valuation: the participation of private investors can help to increase the company's valuation.
7. Flexibility in the structure of the company: private investors are often willing to consider different company structures, such as partnerships with strategic partners.

SOME OF THE DRAWBACKS AND DISADVANTAGES OF FUNDING A START-UP WITH PRIVATE INVESTORS ARE:

1. Loss of control: by accepting funding from an investor, you are giving up some of your control over the direction and decision making of the business.
2. Additional commitments: Investors expect a return on their investment and may require additional commitments, such as changes in the strategy or direction of the company.
3. Conflict of interest: Investors may have different objectives and expectations than you, which can lead to conflicts.
4. Costs: Investors may require a higher valuation of the company, which may require additional cost to the company.
5. Transparency: by accepting an investor, you are obliged to share confidential and strategic information with a third party, which may affect the security of your company.

These disadvantages lead many entrepreneurs to bootstrapping (self-financing) their businesses.

STARTUPS THAT BOOTSTRAP THEIR BUSINESS

The idea is to finance the company with our own resources (either our own funds, the money we earn from other activities...) until we are able to make the startup's income self-sustainable.

PROS

• Absolute control over all decisions without external intervention. 
• Growing pressure and dates internal and controllable by the founders. 
• It is possible to combine it with a job (at least at the beginning while exploring the business).
• The shortage of funds makes us focus on what is important.
• Great for validating the business model at the beginning. 
• There is no obligation to eventually sell the company or to make it.
• Grow very fast to provide an outlet for investors.
• Suitable for businesses where there is a barrier to entry for competitors.

CONS

• Slower growth (potentially) due to lack of sufficient capital. 
• Difficulty in implementing models that are not profitable from the outset.
• There is no external group of people to help us gain perspective and add value.
• There is a lot of pressure to invoice as quickly as possible, which often prevents us from acting in the longer term. 
• The shortage of capital complicates virtually everything: recruiting the team, marketing actions... etc. 

Capital sets the speed at which we can go, which means that the competition is likely to overtake us.

INVESTOR-BACKED STARTUPS

The idea is to look for an investment that will allow us to accelerate the growth of the company and make venture capital or business angel investment funds participate in it (shareholder-wise), which will support us with their capital, network of contacts, experience, etc.

PROS 

• Availability of capital to be able to grow faster and expand. 
• Have the support and experience of a group of investors who often know the sector better than you do and who have made the same journey (or supported those who have).
• Access to a wide and high quality network of investor contacts (not only important to get new investors, but also customers, employees, partners...). 
• Possibility of executing business models where, although there is some profitability from the outset, some scale is necessary to achieve high returns or where investments are high.
• Ability to assemble larger teams and enter new markets earlier, creating barriers to entry for future competitors.

CONS

• Partial loss of control of the company at shareholder level and in the taking of "important" decisions.
• Maximum sense of urgency that a group of people have entrusted their wealth to grow your company fast. 
• If things go well in the end, instead of owning 100% of the pie, you will have a smaller percentage.
• If you get the wrong investors or are not comfortable with them, you will have to "put up with" them for a long time. 
• Pressure to change course if investors do not share your vision for the company's future. 
• Loss of focus and time on raising investment rounds and not on finding customers.

CONCLUSIONS

It may strike some people as odd that I don't mention things like better salaries for the founder... but no investor is going to give you money to make you look better (although you should be paid what you need to live on). Remember that your goal is to make money by making your company more and more valuable, not by paying yourself a good salary. But in any case, whether you are looking for investors or not, remember that investment is not a goal in itself, but a tool that should allow you to achieve your goals (aligned with your expectations):

"The goal of a startup is not to convince investors how great your company is, but to persuade customers how great your product is".