Financing, With Strings Attached

Financing, With Strings Attached - http://www.nytimes.com Avatar Posted by TimJustus under Raising Capital
From http://www.nytimes.com 4129 days ago
Made Hot by: on February 5, 2009 10:44 pm
In this tight lending climate, entrepreneurs may be tempted by an investor's offer of cash, even if it comes with strings attached.

Vlad Shmunis, the founder of RingCentral, an Internet company that serves small business owners, has an answer to that offer: Think carefully before you accept it.

Mr. Shmunis said that when he was trying to raise money for his start-up company eight years ago, the venture capitalists he approached would not invest unless he changed his business model. Instead of serving small business owners, they wanted him to aim at private consumers.

His complaint is echoed by other entrepreneurs. They tell of putting years into finding a business strategy that works and how their success attracts a professional investor. Then, while negotiating the terms of his involvement, the investor asks for changes. He might want to move a company's headquarters or fire the chief financial officer. Or he might ask to replace one product line with another.





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Share your small business tips with the community!
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Share your small business tips with the community!