Let’s summarize what you learned in Part One of this series.
First: any business founder who brings in professional investors like venture capitalists, could be setting themselves up to be fired from their own business.
Second: there are ways to structure your relationship with investors that ensure you cannot be fired.
I have worked with many clients over the years to design their offering to investors so that they could stay in control of their own companies. Some “experts” will tell you that if you sell equity, you are automatically going to be giving up control. This is not true! Equity can be structured in an infinite number of ways. There is nothing inherent in an equity investment that requires you to give up control of your company.
One of my favorite examples of a successful business that has raised millions of dollars from investors but has given up ZERO control is Equal Exchange.
Equal Exchange offers investors preferred stock with no voting rights. Thus even though investors own a majority of the stock, the management (elected by the workers) stay in control.
Other companies, like CORE Foods, choose not to offer equity to investors and raise money in the form of debt.
Knowing what to offer to investors is one of the most important keys to a successful capital raise. And by success, I mean not just raising the amount you want to raise, but also being able to continue to run your business the way you see fit even after you raise money. Take the time to understand all of the options and choose the one that fits best with your vision and goals. That way, you can make sure that you don’t sow the seeds of your own firing by bringing on investors.
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