Investors or Raised Money?

20 Nov

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Building a startup from the ground up is no easy job, especially when you are debating about whether to bring someone from the outside into your business as an investor or to raise the money yourself. Although both ways of financing your business come with pros and cons, in the end you will most likely find that finding an investor for your company is the surest way of seeing your business succeed.

Benefits of Raising the Money Yourself

There are several benefits of raising money on your own for your startup business. One reason is that raising the money yourself will free up time that would otherwise be spent searching for a worthwhile investor. Finding an investor can take time and resources that you may not want to waste. Another benefit is that you will become very good at managing your finances. Without an investor you won’t have very much cash to spare and so you will learn very quickly what your non-essentials are and where you can cut back on expenses.

Benefits of an Investor

Having an investor to backup your startup can be extremely beneficial and may even insure that your startup will succeed. This is especially true if an investor is able to offer your startup something more than just money. For example, if an investor is able to bring relevant experience or skills to the table then you may benefit greatly from his or her wise advice. Investors may also have contacts in which you can use to advance your business. However, the arguably biggest benefit of having an investor fund your startup is the large amount of money that your business can gain access to. This is especially important to your company if you have substantial staff costs of large infrastructure. Often times startups can’t even get off the ground without the money that an investor can provide. Remember, there are only so many corners you can cut without the proper amount of money and vital necessities such as general liability insurance is not one of them. Investors are also extremely beneficial if your startup is part of an incubator such as Y-Combinator.

Conclusion

Starting a business is extremely risky as it is so why create more risk by staying away from investors? The fact is that having an investor fund your business is a huge strategic advantage due to the added value that an investor brings to the table.

2 Responses to “Investors or Raised Money?”

  1. Holli September 5, 2013 at 7:17 am #

    I’m starting a small local business but I need investors – what options do I have available to me aside from taking out a loan from the bank?

  2. Agatha September 14, 2013 at 8:20 pm #

    Companies can generally borrow money from banks or sell bonds to individual investors. Why might some firms choose one method of raising money over the other?

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