Has your company been considering investors in order to raise capital? Do you have plans for major expansion, but have realized that your plans can only come to fruition provided you reach out to venture capital companies?
Additionally, have you considered what this might do for your business? If you have never dealt with private equity firms, your goals have been yours and possibly your partners. However, how would your goals change provided you had investors? Do you believe that in the long-term they would possess the same goals as you and your team?
Many times companies seek out private investors in order to make their dreams a reality. It has worked very well for many companies, but at the same time it has drastically changed those companies.
I recently read an article in Inc. Magazine’s July/August “How We Did It” issue. The story highlighted the founder of Cheezburger, Ben Huh. He discussed how his company took venture capital investments in 2011 to raise $30 million, going from 45 to 90 employees in nine months.
Although the growth was exciting, it put pressure on the company and it started to show a loss. Huh was on vacation with his wife when he learned that his company had reported a 2013 Q1 loss. After a phone conversation with his investors, he cut his vacation short and flew back to make changes. His changes consisted of laying off 24 people, bringing the company’s employment to 42. In the article, Huh stated that it was the hardest thing he had ever done as an owner.
Huh understood he had to do what was best for the company. Was growing from 45 to 90 employees in nine months good for the company? At the time, the team probably couldn’t have said “yes” or “no.” However, in retrospect, it created a negative turn and caused the company to downsize.
There are many positive aspects to using outside investors, but when investment takes place, it can create a lot of changes for your club, and its business. I’m not suggesting that venture capital investments are bad for business. In many cases, they are very good for reaching more people and helping become a stronger company. However, it’s always important to realize that more money can sometimes come with more problems.
Tyler Montgomery is the editor of Club Solutions Magazine. Contact him at tyler@clubsolutionsmagazine.com.
