Attention Entrepreneurs – 100% of a taco stand or 5% of the next billion dollar company?

I had drinks last night with a good friend and we got to discussing the pain most entrepreneurs feel in giving up equity in their company. In fact, back in my days at CTEK I clearly remember an instance with a bioscience entrepreneur. He had a patent on a fabulous technology. World changing technology. Next billion dollar company technology. Everyone around this company was chomping at the bit to invest, except for one major problem; the entrepreneur was a bit of a loose canon. I remember sitting around the table with about 15 angels who were ready to invest close to $3M in capital, a very large sum for independent investors in Colorado. There was the usual negotiation on valuation, whereby the higher valuation (favored by the entrepreneur) meant he would keep more of his company, while the investors wanted a lower valuation (they would own more).

In a moment of frustration, and clearly the moment his fate was sealed, the entrepreneur said “I’m not bending on this point because I am GOD. This is my company, my technology, my product. Do it my way or get out.”

Know what happened to this particular entrepreneur? Nothing. He needed funding to get him to the next stage, couldn’t get it, and his company died. Now, I’m not saying you should always listen to investors. They have their own best interest at heart usually, which is protecting their investment. Nor am I suggesting this entrepreneur is the norm. But getting investment capital always comes with a high price tag. If you don’t like it, get a loan, or bootstrap (a FABULOUS option). But investment capital can frequently accelerate success for many companies. So you can either own 100% of a taco stand, or 5% of a huge company.

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