4 Reasons Startups Should NOT Take On Investors

For startups, it’s tempting to search for investors to boost your business’ budget. After all, it’s better to spend somebody else’s money than your own. But, what if you realized that trying to find investors was a bad idea? Would you believe the advice, or let it wash over you and do your own thing?

The truth is that while investors do have pros, there are drawbacks which you must consider before signing on the dotted line. Once your signature is on the contract, there is no backing out.

With that in mind, here are the reasons why you are better off analyzing the pros and cons.

You’re No Longer In Charge

Yes, you’re still the boss, and you still hold the most senior rank within the company, yet the dynamic changes when you have investors. Suddenly, there are people who you need to please who weren’t around previously. Not only that but if you don’t, they will take their money and leave you in a hole without a shovel.

Therefore, it’s not uncommon for startups to lose their power, one of the most significant reasons to launch a startup in the first place. The extra resources mean that you no longer set the goals or strategy – you have to share.

They’re Hard To Get Rid Of

What makes outside investment worse is that you can’t get rid of them quickly. To begin with, they aren’t going anywhere without breaking, even on their initial investment. Even then, it’ll be with a heavy heart because they didn’t get a high ROI. Secondly, and this is crucial – if they do make a profit from their investment, they have no reason to leave.

As a result, you’ll be left with a partner you don’t like or want who takes a split of the company’s turnover.

Yikes! It’s like Investopedia says – you won’t pay dividends as you need the money.

Not All New Businesses Start At The Bottom

There is a myth that you have to start at the bottom of the ladder as a budding entrepreneur. It isn’t true. Find the right business opportunity and you can take control of a company with all the right tools to succeed, one that doesn’t require investment.

If you want to start a business with less risk (and ultimately, less potential for reward), a franchise might be a good choice for you. Sites like Franchise Direct have listings to help you locate an affordable yet profitable organization.

Investment Doesn’t Guarantee Success

Say you do find somebody to invest… it doesn’t guarantee success. You’ve still got to use the resources correctly if you’re going to grow and hit your targets. Mismanagement of funds only puts you in a worse position.

Too many companies see securing investment as the last hurdle. If anything, it’s the first one, and the wrong attitude will mean that you fall at the next.

Where do you stand on searching for investors for startups?

This is a contributed post.