Should I Accept Outside Funding?

mallocmalloc Posts: 7subscriber
edited December 2007 in Startup Funding

All,



 



When I wrote my business plan I planned on bootstrapping. I was not considering looking for investors and I did not want to use debt instruments to fund the startup phase of my business. I wrote my system, built my site, paid for professional web-design and branding, and filed for a patent. This has taken two years and a little over $15k – paid for out of my own pocket. My original plan was to do all initial marketing (mainly cold calls and site visits) myself and grow very gradually.



 



I have an acquaintance that I respect and who is a very good salesman.  I had even considered approaching him sometime in the future once I had a sales force large enough to warrant a full time sales manager. I asked him for some advice a few months ago and we started talking. He stated an unsolicited interest in investing a substantial sum for part ownership. I initially declined his offer since this was not in my business plan. Several conversations later he is now my first sales person and will start in January working as a part-time employee for commissions only.



 



I didn’t expect such help so soon and now I am wondering if I was too cautious in my planning. If you were in my situation would you trade a minority share of you business in order to afford more marketing and gain the possibility of faster growth? For the sake of this argument the individual is someone I have known for several years and is someone I have found trustworthy.

 

Thank you,

 

David

Comments

  • stonesledgestonesledge Posts: 8subscriber
    David,
     
    This is something that you need to think long and hard about. You built what you have, through your own efforts and planned on staying a one person owner. You state that you had an original plan of action. You made this plan for a reason. Ask yourself if that was because you felt you wanted to or you had too. Now an opportunity has come to you and you should think about how that may benefit you and the business you are creating. From your words, this gentleman seems like an asset. What would bring him to the table offer? Would this advance your business, help your plan where without him it would not? You should never ignore an opportunity, talk to him, discuss what his expectations would be, what part would he play, what he will offer as a partner and fundingwise. Talk to him about your plan and ask him where he comes in and what your expectations would be of him. If you make a decision to move forward with him, then explain fully (disclose) everything about the business, so he can have the opportunity to make a wise decision himslef. If you offer him an equity share, then make sure if he ever decides to sell that you have the first right of refusal.
    I would work with him on the sales commission basis and see where his intentions are. After 6 months or 3 months, if he is passionate about YOUR business and is producing great results, managing well and working well with you..then make your decision. Make sure that you hold all rights to who is employed by the company etc and that if things are not working out in the posistion he is holding, things can be done.
    Erin
  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    David,
    There are several things to consider including:

    Will this infusion of capital - advance the company toward your goals or will it mean a "new" direction?
    Are you "ready" to have a working partner in this business? (whether equal or not)
    Do you both share the same long-term vision for this business?
  • entreplanetentreplanet Posts: 3subscriber
    How much of your company are you willing to give up in order for funding?
  • RoblueRoblue Posts: 0subscriber
    I`ve read all your responses.  However, personally, I feel stonehedge got my point across clearly.  The answer you seek must come from you after some very thorough and careful consideration.
    This is not to say the other responses where irrelevant, for they to identified aspects you should make a point to consider and not overlook.
    I wish you the best.
  • mallocmalloc Posts: 7subscriber
    All,
     
    Thank you. I appreciate your responses. You have givien me a lot to think about.
     
    Regards,
     
    David
  • robertjrobertj Tampa Bay, FloridaPosts: 0subscriber Member
    David,
     
    Glad we could help. If you need more input or have other questions as you move through your decision process - come on back. Or send me a PM.
     
     
    robertj12/15/2007 6:53 PM
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