Early Stage Investent Do’s and Don’ts

For most people who want to start a business, just getting early stage investment is the ultimate goal. It’s the one thing you’re focused on, and it’s the one thing (you believe) that’s standing between you and long-term business success. Working with the right business plan consultants can be a huge advantage. 

However, business finance may not always be the solution to all of your problems, and there are a few things you should remember when you’re looking for it. 

DO Vet Potential Investors As Carefully As They Do You

When someone offers you business finance, the first instinct is to leap at it, without asking any questions. However, while it’s tempting to take every possible offer of the money you need to start your business, you do need to take the time to examine the investors who are doing the offering. Make sure they are above board, and look into their reputation. You want to be dealing with people you can trust!

DON’T Turn Down Equity Investment Options without Careful Consideration

Often, entrepreneurs are so wrapped up in their ideas, which they don’t want to share them with anyone. That’s often why equity investment offers, particularly those that require you to hand over a significant ownership proportion, are turned down by entrepreneurs. However, while you might not like giving away 20, 30, or 40% of the equity in your company, you should also remember that 100% of nothing is still nothing. If you don’t have the money to finance your idea, then you don’t have a business. 

DO Make Sure That You Get Enough Business Finance

When you’re starting a business, the natural inclination is to look at your idea through rose tinted glasses. However, while it’s good to be positive, underestimating your financial needs can leave you in a sticky situation, where you have to ask for more – and that never looks good! Apply the old adage, and hope for the best but plan for the worst, and you should be fine. 

DON’T Take Too Much Money Either!

Sometimes, particularly when you are dealing with a venture capitalist, the investor you are dealing with will try to turn your business idea into a mega moneymaking machine. One of the ways they do this is by offering you more money than you need. Don’t take it, or if you do, keep it in an account for emergencies only. Fancy offices, flashy cars and all the rest of it can come later. For now, you need to start your business as frugally as possible!

DO Cover Yourself

When you deal with a venture capital firm, or even a traditional lender, in many cases, you will be required to have a separate business entity, which protects both your assets and the institutions if something goes wrong down the line. 

It’s ALWAYS a good idea to make sure that it’s not you personally that’s getting business financing, but a company or corporation. If you don’t set up the deal that way, then your personal assets could be at risk if your business fails. 

There are many other do’s and don’ts when it comes to business finance, but as long as you keep a cool head when faced with an offer, and investigate the pros and cons of each one, you should be fine. Don’t be too hasty to secure finance, make sure you’re repaying a loan at a reasonable rate if you go that route, and always be frugal when you start a business.