18 The Limitations of Venture capital by Andre Alonzo Chambers

There are a lot of small business owners who are looking for an external source of funding to keep the business going. If this is something you are dealing with, you might be thinking about going with a venture capital firm. There are a lot of advantages of VC funding. You can get a large source of money relatively quickly, and you may be able to find someone who can help you make decisions. On the other hand, Andre Alonzo Chambers also wants people to know that there are limitations if you decide to take this path. What are some of the top limitations of VC funding?

You Lose Equity in Your Business

One of the major limitations of this source of funding is that you will need to surrender equity in your business. This means that if you decide to sell your business down the road, you will not get as much money. According to Andre Alonzo Chambers, this is a delicate discussion. You need to think carefully about how much equity you are willing to surrender, as the equity you give up is a reflection of the current valuation of your company. Do not surrender equity in your business lightly.

You Lose Some Decision-Making Power

If you decide to go with VC funding, Andre Alonzo Chambers also believes that you will lose some decision-making power. Essentially, you are bringing on another partial owner. Therefore, you cannot make any decisions without talking to the other owners of your business. Now, you have a VC group involved, so you will need to run any decisions by them. Sometimes, they will agree with your decisions, but in other situations, they may disagree. This can make it difficult for you to move the company forward.

You Must Have a Formal Reporting Structure

If you want to bring on a venture capital firm, you need to have a form of reporting structure in place. This means that you need to have an established board of directors, which can add another layer of bureaucracy that slows down your business. According to Andre Alonzo Chambers, you may have to get your board of directors approved by the VC firm before they decide to give you money. This can make it very difficult for you to get the funding you need. Think carefully about which VC firm you decide to go with, and make sure you consider your other options as well.

Think Carefully About Your Funding Options

Clearly, you need to think about the benefits and drawbacks before you decide to go with a VC firm. If you are looking for an alternative, Andre Alonzo Chambers wants all small business owners to think about getting a source of funding from a private investor. This is a more congenial relationship, and you need to have someone you can lean on when you have questions about how to run your business. If you work with a private investor, you will get exactly that.