Most of us have heard of Michael Dell and his company Dell which pioneered the way for making mail order PCs for the masses. Whilst it was not a novel idea by any standards at that time (90s), Michael Dell was able to scale his business much faster than other businesses. You could say it was luck but we often attribute this type of success to the ingenious business minds of the founder.
Some businesses seek additional necessary capital by borrowing money from friends or relatives or even angel investors. In this way, they still have control over the business but they are held responsible for keeping the investors moderately happy throughout the venture. People like Michael Dell see the opportunity and their primary objective is to scale the business as massively and quickly as possible. Notice that the folks on the Shark Tank TV show (for the would be entrepreneurs) almost always use the words â€˜how to scales Basically what they are looking for first is that the business idea/product is good and also has a viable market. The next question in their heads is how can the money they put up front lead to rapid growth and scale to a level where they can get a return on their money and more.
These are crucial questions to ask when you are a business owner and you have to decide for yourself the best course of action that fits with your needs. If you have worked on a world class product, it would not make sense to keep it incubated within a small scale, you have to push it out to the massive audience. This entails, taking your products/idea/service to parties that see value in what you are offering and can help you push it rapidly to market and to a wider audience in a short space of time. Those types of investors are typically venture capitalists and would not want to invest less than a few million dollars.
The question to the business owner is how far they want to grow and to what level? If your interest is massive scaling, then you have no option but to go for the VCs unless of course you have hundreds of thousands of dollars to invest right away. The advantage of doing this, is that you go to market quickly and your visions for the company will materialize earlier. You also end up minimizing the whole risks that you take by yourself only. The disadvantage of doing this is that you lose some share in the overall business.
The downside of this are:
- You need to find the VCs that will take an interest in what you are doing
- Give up some share and maybe the lead position
- Have an aggressive business plan that meets yours and VCs expectations
They may seem like downsides but in fact they are worth sacrificing for the end result which is faster growth and turnaround with lots of sleepless nights but potentially with huge rewards.
Whatever paths you take, make sure you have looked at all your options before deciding one way or the other. The important thing is that you feel satisfied with the way things are going, because this would be important to the well being and progress of any business venture.