There is a time and place for everything. Sometimes, taking on investors is the right choice, but here are some examples of when NOT to seek investors. Many new entrepreneurs are under the impression that it takes an investment in the beginning to get an idea off the ground, but that’s just not true. In fact, about 80 percent of all entrepreneurial businesses were started without any early investing at all.
These days, with the growing number of free apps and online tools that allow you to create websites and so on, it’s even easier than before to start a new business. There is evidence that starting out with too much money can very quickly sink a new idea, but still, many new entrepreneurs that go looking for investors too soon wind up giving up a sizeable chunk of their equity.
When Is It Advisable to Not Take Investors?
- When You’re Being Flashy – Many new business owners are focused too much on trying to create an impressive environment. Fancy offices with expensive décor and a high-rent location are nice, but they do not build the brand like focusing on providing a great product or service.
- When You Have Commitment Issues – Ever watch Shark Tank? One of the first questions the sharks ask is, “How much of your own money have you invested in the business?” If you are unwilling to commit your own cash to the idea, then you probably shouldn’t be asking other people to either.
- When You Bite Off More Than You Can Chew – Trying to move from small scale to massive scale is where most start-ups shoot themselves in the foot. Start-ups that try to shoot up into outer space too soon often burn up in the upper atmosphere.
- Hiring with Salary – The most successful entrepreneurs find ways to get valuable people on board without offering a salary. Offering a position as co-founder with equity is a much better way to ensure full commitment and success.
Garland & Mason, L.L.C. – New Jersey business lawyers