John Grossman, writing in the NY Times blog, recently related the story of a cash poor entrepreneur who was trying to decide if she wanted to turn over 75% of her company in exchange for $250,000.
This is a question we hear all the time. We liked John’s article, but there were a few key questions that none of the respondents touched upon: did the entrepreneur like the potential investor? Did they dicsuss how they could or would work together?
Did the potential investor have a successful track record of working with the management of the companies in which he invested?
Too often we see entrepreneurs turn over control to investors that they can’t work with, and they wind up functionally out of the company.
The bottom line is don’t give up control to someone you can’t work with. There are other investors out there.