Long before Breaking Bad’s Walter White goes from grading chemistry tests to grinding up sinus relief tablets in a crummy RV for his first meth cook, he takes a buyout… and regrets it.
We learn that back in grad school, Walt and a friend started Gray Matter Technologies, a tech startup based mostly on Walt’s research. After a falling out, Walt sold his share of the company for $5,000. Decades later, Gray Matter has soared to a 2.1 billion valuation… and earned a Nobel Prize nod.
All based on the work Walt put in.
Even if you haven’t watched Breaking Bad, you can imagine how he feels… and how hurt pride and regret can grow toxic under the pressure of piled-up bills, a son with cerebral palsy, bored students, and a surprise cancer diagnosis.
While it’s a kick-ass drama, there’s a moral to the story that every entrepreneur should wrestle with. Think carefully about where your story might be going… especially when there’s a fat buyout offer sitting on the table.
Put another way, how do you raise money without selling your soul? Giving up equity?
If selling your company is the best move, how do you do it without giving up total control?
Word on the street is that the meth kingpin gig is already taken.
Think Hard Before Selling Equity for Funding
While there might be great reasons to sell, the pressure’s on, it’s on big time.
Don’t get us wrong.
In most cases, that pressure is a good problem to have… and if we’re talking big Venture Capital for some new, earth-shattering technology, then hey, pop the champagne.
But for most companies and most people, and with raising capital from investors being a long and brutal process, a concrete offer to buy your company is probably one of those once-in-a-lifetime deals. If it’s what you’ve been planning and working toward all along, with an eye on securing good exit terms, then that’s excellent… and hooray for you.
But know that selling comes with consequences.
For starters, those might include giving up some, or all control of your company. Depending on the relationship with new or added owners, this might mean having to say the right thing, think the right thing… and in the very worst cases, do what you’re flat out told.
Even if you’re still calling the day-to-day shots, sharing ownership probably means sharing control with other shot-callers—anyone from their corporate shareholders to board members to a CEO who’s lent his ear to some consultant from Hell.
With more and more corporations growing risk-averse, and tilting all their messaging to what they think is expected of them, sharing control can mean diluting your brand or your company until it’s unrecognizable.
Funding may be life or death, but there are better ways for entrepreneurs and emerging businesses to get it… especially if they don’t fit the mega-corporate mold anyway.
Fundraising for Entrepreneurs
While there are dozens of factors, starting with your goals, the size of your business and the scale of your fundraising, these non-traditional suggestions should get you thinking about ways to finance without selling outright or losing control of your company.
Here’s four of ‘em.
If you’re starting out—and if you’re overhead’s low, your team is small, and your balance sheet isn’t lopsided with large capital expenditures—then consider playing things close to home.
Build your business patiently, over time, from the revenue you bring in.
Down the line, and if your personal finances look good, you can upgrade to bank or personal loans, or take out a revolving LOC for your business. If you haven’t already.
2. Go the Family, Friends, or Crowdfunding Route
Go ahead, roll your eyes.
While some folks might frown on hitting up friends and family, there’s a strong case for borrowing money from people you trust. In most cases, and unless you’ve already made off to Mexico with the inheritance… they probably trust you back.
And while the likes of Gofundme might make you think of helping out cancer patients, there’s a number of crowdfunding platforms that can help you reach fundraising goals with the right buzz, messaging, and donor engagement.
Platforms like startengine.com that offer tiny equity shares for every donation are built with entrepreneurs and start-ups in mind.
Might be time to swallow some pride and get that profile picture up.
3. Raise Funds with Invoice Factoring
For companies with a growing or reliable clientele, invoice financing can be a quick, although riskier way to secure a loan.
The process involves “selling” your invoice to a lender as collateral, who fronts you a portion or percentage of the payment due on it. You pay your lender back after the invoice is paid, with fees that factor in the amount, your business, and when your client pays it.
Be warned: because it’s short-term, invoice financing fees are generally higher. But unlike investments or traditional bank loans, there are fewer requirements to get going.
4. Try Asset-Based Lending
For up-and-coming companies who need fast funding, tangible assets like equipment, inventory, real estate, or accounts receivable can act as collateral.
Unlike selling, or soliciting investments that give away equity, asset-based lending (just like invoice factoring) keeps you in total control of your company.
Topping off this shortlist, one more suggestion comes to mind.
Or Work with Garrington
No shameless plug or tagline here, just some blunt honesty about what we do well.
Our team specializes in alternative lending for small to medium-sized businesses and entrepreneurs… the brand of doers who know where they’re going and may not have time to jump through stringent regulation hoops or wait around for angel investment.
If you’re like the entrepreneurs we know and love, you’re more likely to succeed when you’re in control. And if that first year of growth is like an ambitious cross-country road trip, one thing’s obvious—you won’t get there by sharing the wheel with someone who’d rather go somewhere else.
If you planned it, mapped it, and proved that you can pay back the cost of gas, then the wheel should be all yours.
For startup business owners who need operating capital, but don’t look like giving up control, we’ve got options.
Give us a call to learn more about invoice factoring, asset-based lending, lender financing, and other ways we can get you the funding you need to hit the ground running.