MBA2065 Q&A Wednesday: How do I get investors without losing control?

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Visit Dell.com deals. Hey oh. Welcome to the $100 MBA show, helping you navigate the world of business every single day with our daily 10 minute business lessons for the real world. I'm your host, your coach, your teacher Omar Zenholm. I'm also the co founder of Webinar Ninja, an independent software company I started with my co founder back in 2014 and today's episode is Q and A Wednesday. On Q and A Wednesdays, we answer a question from one of you, one of our listeners. If you've got a question you want to ask, just go ahead and email me over at omar100,mba.net Today's question is from Ralph and Ralph asks, hey Omar, I'm looking to get investors to invest in my startup. I've been running my business for about two years now and we've had steady, slow growth, but I'm looking to take things to the next level. I want to remain in total control. I want complete control over my business, but I do want to have investors. How do I make sure that I have total control when I'm making the deal with my investors? Any advice would help. Thank you so much for the amazing podcast Ralph. Congrats Ralph on your business and for the growth and for the stage you're at right now. Of course you want to remain in control Most people become entrepreneurs because that's why they became a business owner. They wanted to have full control over their business and their life and their destiny. They want to be their own boss. That makes total sense. But I'm going to have to level with you when it comes to when you bring in investors and what that means for you and your control. I rather just be honest with you about the reality of this situation. So that way you can make a decision to make your peace with that and say, okay, that works for me, or no, that's not what I want. I'm going to move in a different direction. So if you're listening and you're thinking about maybe taking on investors at some point, but you're worried that, hey, will I be losing control over my baby? You're going to find today's episode really, really helpful. Let's get into it. Let's get down to business.

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Anybody entertaining the idea of bringing on investors in their company are concerned with the concept of losing control, bringing other people. Are they going to dictate what I have to do, trajectory of the product or my business, how much time I spend on the business, all that kind of stuff, all those thoughts. So here's the reality. Most independent bootstrap entrepreneurs that don't take on funding do so because they want to remain independent and not in regards of like working alone. They want to be able to have full control over their business and be the person that really is the decision maker every step of the way, regardless of how fast you're growing, how slow you're growing. And they do this because they want the business to fit their lifestyle. This is what's called a lifestyle business. They want to be able to be flexible and be able to slow things down if they have to, because things are going on in their personal life that are taking their time. They may want to speed things up because maybe right now they're in a hustle mode and they want to really get a lot of ground covered for their business. This is kind of the advantages of being independent and being a bootstrap business is that you dictate the pace, you dictate how the business goes. Now, even if you have it in writing where you say, hey, investor, I'm going to take on X amount of dollars, you're going to take a percentage of the company, but I'm in charge. I'm the person who makes all the product decisions, that makes all the business decisions. I have the right to veto ideas or even if you force me to have a board, I have the say to overrule the board. Even if you have this all in black and white and you're the master of all things in your contract, that is one thing. And the reality of things, when you have an investor is another. Why? Well, what does the investor give you? Well, the investor gives you money. And if you're relying on the investor's money to grow and to maintain your business, then by definition they have control. That's just the physics of the relationship. You can't change it. Once somebody gets involved and you're relying on them for something, they have some control. Because if the money runs out, the person that invested is the most likely person you're going to go back to to ask for more money or to tap into their other investor friends or to raise another round. And therefore they become very powerful because they become the oxygen of your business. You're not experiencing this right now because you're bootstrapping your business. You're not relying on any other source other than your revenue for your money or your influx of cash. So you're basically spending within your means. But once you start getting cash from an investor, they're going to have expectations of growth because they're not investing to get no return. They want a massive return. Most investors are not interested in a 30 or, or 40 or 50% growth year over year. They're looking for 5 to 10x return at minimum of their investment. When it's all said and done. Some are looking for 100x, but we're not going to go down that road right now. So if that is why they're investing, they're going to really want you to push, push, push, go, go, go and spend your money or spend the money they're investing to grow and therefore you're going to soon be tapped out, which is normally what happens. And you're going to go back to the investor for more capital and they're going to get obviously more equity. So in that regard, there's no way around it. They will have some level of control. That's why many founders, especially in the tech space, go and explore other forms of funding outside of the investment route. They look at getting a loan from the bank, they look at getting debt financing, which is very common in the SaaS world. They look to do Kickstarters or pre sales, they do promotions on annual contracts to get more money up front. All this so they don't have another person or entity having that financial control over them. Now the reason why I paint this picture as it is is so that you know what you're getting into. You might be comfortable with this. You might be saying, hey, that's okay. I want somebody to take care of the finances and tell me to grow and to push and really prioritize growth over profitability. Maybe you're aligned with those values and those goals and that's where you see your company going. You can find a lot of investors that are happy for you to take care of all the business stuff and all the decisions and be more of a silent investor. In my over 20 years of entrepreneurial experience and just being around the space for a very long time, it's very rare to see a company just get an investor. They invest and that's it. They skyrocket. No, it's a cycle. They invest some money, they see some progress, they grow, they invest some more. They invest some more and the founder is quite reliant on that investment because they're pushing so hard on growth, their burn rate is quite high and they run out of money. That's not really maybe their choice. This is why the investor got involved. They want to see them do that so they can grow as fast as possible, so they can get a return on investment as possible with an exit. And many founders I know are okay with this. And if you're okay with this, more power to you. That's awesome. And find a good investor that's good for you, that you can have a solid long term relationship with that gets what you're trying to do and trusts you as the founder of the company. I got more on today's topic, but before that, let me give love to today's sponsor.

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It feels good to Geico to wrap up today's Q and A Wednesday's question from Ralph Anytime anybody gets involved in your business, they will influence the business. That's just the nature of it. Just like when you get into a relationship with somebody on a personal level, they're going to influence you, they're going to influence your decisions, they're going to influence what you do in the future, how you move forward. Whether you recognize it or not, they will influence your business because they're part of the relationship. They're part of what you're doing. Thanks so much for your question, Ralph. If you got a question you want to ask, just like Ralph did, just go ahead and email me over at Omar MBA Net. Before I wrap up today's episode, a quick favor to ask you. If you're on Apple Podcasts right now, go ahead and smash that subscribe button and leave us a rating and review. If you're on Spotify, you can rate us. As soon as you hit the Follow button, you'll have an option to give us a star rating. By doing so, you can you help others find us and enjoy the show too. Thanks so much in advance for doing that. Before I go, I want to leave you with this. A great exercise to do when you're looking to maybe get investment or get some funding is really work out what you're going to do with the money. Okay, like how much money do you actually need and what will you do with it? What results do you expect to gain and really get really granular, right? Write it down. Do the math. Many people who do this find out, actually, I don't need that much money to achieve the goals I want to achieve to take my business to that next level. And they realize, oh, I can just get a business loan or I can get some debt financing or I can get a grant. Sometimes the money we need to achieve what we have in our head is far less than we think. But we'll never know if we don't do the math. So go ahead and do that. Thank you so much for listening and I'll check you in tomorrow's episode. I'll see you then. Take care.

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