The Looking Glass

  • Last day of classes is 5/3!

  • Summer open house on 6/25, register @!

  • Registration for Fall begins on 4/2, make an appointment with your advisor!

Filed under News

Are There Disadvantages to Having People Invest in Your Business?

Hang on for a minute...we're trying to find some more stories you might like.

Email This Story

If you are thinking of starting your own business I recommend you read my article which was part of a project for Professor Charles Crowell’s class called Social Entrepreneurship. So let’s get started.

The kind of investor will depend on their interest in your company. A silent partner can invest without active participation, an angel investor may want to participate only until you obtain other financing and then cash out, and venture capital investors have specific goals and objectives they expect you to meet. Each investor will have a different interest in your business, different than your own interest. There are four main points on the disadvantages of investors in business: This article talks about the disadvantages of investors in business“long-term thinking, decision making authority, freedom to change, and risk vs. reward.”

When someone is starting up a business, they see long term goals for themselves and their business. When someone is investing in your business, they are not caring or investing in your dreams; they are investing in your business only. An investor may want you to make decisions that are better in the short term, while you may want to make a decision that is better for your business in the long term. A lot of the time investors want to be part of the decision making process, and at other times they may want to be involved in other things such as a company logo.

A lot of the time, when someone starts a business it is because they don’t want to work for someone and want to make decisions on their own. When an investor is trying to be part of decision making, it can be a bad thing for the business itself. When an investor is trying to be part of decision making, their decisions can be unprofitable, misguided, uninteresting,and even unethical. When someone owns their own business, they have the right to change things about  their business.

When a business owner changes things about the business, an investor may find that alarming and they don’t like it. A business can grow faster with adding additional capital but this can decrease your investors’ interests. Someone may find business opportunities that involve taking more of a risk, for example, a more desirable location, but it has higher rent. Since investing in a small business can be a huge risk, investors may feel they have taken all the risk they can handle. When the owner of the business decides to take on more of a risk for the sake of the reward, it can interfere with your investors’ fears of losing their investments.

I do agree with many of these points. For example, an investor does not care about the dream someone may have for their business, and the long term goals that go along with that; an investor only cares about the short term outcome. When someone starts a small business, they need to keep these things in mind when they are dealing with investors.

Leave a Comment

If you want a picture to show with your comment, go get a gravatar.

WP Facebook Auto Publish Powered By :