Posted on 31. Jan, 2012 in Kirchner Blog
Early-stage financing is difficult, no question. Finding investors that understand the opportunity, are convinced that their risk is warranted given the potential reward, and getting investors to the point of putting a term sheet in place can be Herculean tasks separately, and even more challenging in concert.
When businesses overcome that initial challenge but struggle accepting the terms offered, they are often working against their own interests, not for them as they would like to believe. Concerns about dilution, loss of control, and other issues often cloud the critical concern: filling the gas tank enough to make it across the finish line (or at least to the next available gas station).
Management is best to remember that the main objectives in financing a business is to achieve an outcome where the Company’s business plan is fully funded in order to maximize the potential return. Sometimes this needs to be pursued at the expense of dilution or control. Provided that the best offers have been sussed out, taking the money and keeping moving forward proves time and again the better choice than to delay, decline and/or offend.
Inevitably, if the venture is successful, the founders will have a loyal investor base eager to put money into the next one s/he starts. That is a powerful thing, especially in this investor environment.