I Have A Great Idea and Need An Investor: NO YOU DON'T!
Although, I have not made it ‘big’
yet, I am taking the liberty to write few lines on something called ‘Finding an
investor for a business’!
Recently a business plan was
emailed to me, and I told this person that although the business concept was
good, they shouldn't pursue this idea because it required that they find an
outside investor. You should only look for an outside investor if you have
already successfully started your business and need additional capital to grow,
if you have experience launching at least one but preferably more businesses on
your own (the more complex the better), or if you have accumulated enough
experience in your industry to truly be considered an expert. Otherwise, don't look for an investor, and find a business that you can fund on your
own!
First of all the chances of you
finding an investor are almost slim to none, unless you can get your family or
friends to invest. Personally I would
never take money from family or friends, because statistically the chances of
failing are great, and what are you going to say to your friends or family when
you lose their money (I might make an exception for someone that truly understands
business)? If you can't get investment
from family or friends, then you will have to find an outside investor. You've never started a business before, and
you aren't an expert in your field, so why would any intelligent person
(intelligent people are usually the ones with money J
) invest in your idea?
Even if you were able to find an
investor I wouldn't recommend it. An
investor means you have just been bought and instead of having the freedom of
being an entrepreneur, you now have a new boss.
Nobody is going to give you money without putting extreme pressure on
you to earn a profit on their investment. They invest to earn and not to learn!
Right now I'm having fun launching
'O2; Breathing Brain, Respiring Career! and learning about business. If I had an investor, I certainly wouldn't
have the luxury of launching the business at the more modest pace that I have
launched O2.
When you acquire an investor there are future goals that are set that will
allow the investor to profit off of their investment. Then the investment capital is used to hire
staff, pay for research, launch products, introduce new services etc, depending
on what kind of business you are in..., all towards the objective of meeting
the goals agreed upon with the investor.
The problem is that it’s a start-up
and many of your guesses are just assumptions.
You received money to reach your goals, so you are obviously going to
invest in recruiting new staff, infrastructure etc. Once you launch your
product/service you will realize that at least some of your assumptions were
incorrect. Unfortunately you have
already hired staff, setup your office and invested money in resources aimed at
targeting an incorrect assumption. It
won't be that easy to just fire staff that you spent months recruiting and/or
training or just to change your office location. It also won't be easy to explain to your
investor that you just wasted her or his money on an incorrect assumption. Best case scenario is you fire the staff you
didn't need; just change the office location just because things were not going
good and you annoy your investor by admitting that you wasted their money. Worst case scenario you get so trapped in the
world of your poor allocation of resources that you continue down the incorrect
path.
With O2, I am using my own money and along
with my partner.
When I realized something wasn't
working, the worse thing that I had to deal with was the disappointment of my partner
or staff that they had been wasting time down the wrong path. Same is the case
with my partner. However, that’s a much easier problem to manage than having an
investor that doesn't completely understand what’s going on, and you have to go
to them and explain that you have been wasting thousands or lacs pursuing the
wrong path.
I don't care how frugal you are, but
I can bet you are going to spend one lack given to you by an investor
differently than you are going to spend one lack of your own money!
If you are not an expert or don't
have entrepreneurial experience, I don't think having an investor increases
your likelihood of success. It's a far
better idea to start a business in which you have the financial means to fund
on your own. You will learn a lot more,
you will have more fun, and if your idea is successful then you will have a lot
more equity.
Starting a business with your own
savings is like creating true art for the love of it. It’s truly a beautiful endeavour, you and
your team against the world, fighting and scraping to figure out how to make
your venture a success. Not just for the
money but for the love and the passion of what you are doing. Introducing an investor in the beginning
makes it all about the money from day one, and you have corrupted the process
from the beginning.
Cheers, I don’t need an investor!
And I’ll make it big, very big!
1 comment:
It's not always true... a good entrepreneur is just not the one who can run a business but also has skills to attract good investors. It's his job to put the idea in his mind on a paper to make that investor look at it in the same lucrative way. That's bloody entrepreneur.
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