Ian Pribyl, co-founder and chief marketing officer of Pivotal Group, explains why small startups shouldn’t automatically accept money from venture capitalists and other outside investors, no matter how tempting the offer might be.
A surprising number of startups are thriving in the depths of the coronavirus pandemic and recession, Pribyl claims. He attributes their success to an embrace of digital technology, coupled with a degree of agility and adaptability that is the hallmark of smaller enterprises.
The temptation is great for such companies to pursue the next step, and attract venture capital from outsiders. But Pribyl believes they should think twice before doing so. Accepting outside funding immediately bumps founders down to second-class shareholders, he says. “Every time you’re giving away a chunk of your company, you’re giving away control.” Such a move can be especially hazardous in a down economy, when the ability to pivot and adjust to changing markets is more important than ever. A qualified investor can bring an abundance of wealth, knowledge and expertise to a fledgling company, Pribyl acknowledges, but founders should be careful to ensure that they’re getting more than just money out of the deal.
By retaining power and control over the company, startup founders can dictate the speed of growth and direction of the business, without interference from an impatient investor, Pribyl says. “You can stay true to your mission, or pivot away from it if you choose.”
Of course, early funding has to come from somewhere, but Pribyl believes that smart marketing can help to close the gap between a small startup and larger, well-capitalized competition. In a questionable economy, being able to devise a compelling narrative while staying independent of outside money provides startups with “a massive advantage,” he says.
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