Capital and Your Business
What’s particularly interesting about the critique is that as businesses grow, owners often have to– cede some degree of control. This is the case whether taking on equity or debt. The reality is very few businesses are wholly-owned successes that continue to fund themselves through their business savings or cash flow alone. I think both the investor/equity community, from angels to venture capitalists, to the lending community from banks to alternative lenders, when putting aside their respective business interests, all agree that self-funding is the way to go if you have the option. But very few companies live in that world.
Many would argue that outside investors with an equity stake are no more incentivized towards the desired outcome of the business owner than the lender who seeks repayment on the loan. All of us who study business know that equity investments can come in the form of strategic investors or simply cash. We also appreciate that often equity investors enjoy privileges like rights to first profits or exits/payouts, which owners may not. A tough pill to swallow for the business owner.