Raising Capital From Employees Has Its Positives and Negatives

Posted by bea.alonzo under Raising Capital
From http://thefederalcircle.com 5125 days ago

As an entrepreneur and business owner you will probably have to raise capital one or more times throughout your company’s lifecycle. You will meet with your share of private investors and bankers over the years, and in some cases it will make sense to accept funding from these groups. And for many, these will be the only sources of capital that will be required for their company to achieve great success.

Who Voted for this Story

Top BizSugar Users

This week's most active BizSugar users. Join Them!

Comments

Written by vanessa.tan
5108 days ago

I'm sure, by offering something very valuable to them like making them a part of the governing body will make them more hands- on and inspired. Because they will be getting more from it.Good Idea!

- 0 +

Written by vanessa.tan
5116 days ago

I agree, there are really cautions in every decisions we have to make in our business, most especially in raising capital. It is a very risky part.

- 0 +

Written by Small Business News
5124 days ago

Hello Bea,

Offering investment opportunities to employees is probably also a great way to get "buy-in" on their part, however, some start up gurus urge caution about the way this is done. For example, while offering the opportunity to invest (in the form of actual money not sweat equity) might be a win-win, exchanging a salary for interest in the company in order to save money may not. Once the equity in the second example is granted, how can anyone measure the value of the contribution being exchanged for shares going forward and what happens if this employee's contributions wane or become overall less important to the success equation of the company in the future? How is their ongoing contribution to the company to be calculated? Monetary investment, on the other hand, is something apart from performance at work, and can be valued separately as a contribution.

- 0 +

Written by jewel.davis
5124 days ago

Certainly ma'am, this post is very informative and if we really want to raise capital we really have to weigh its risks. Thanks for presenting its pro's and con's.

- 0 +