How to Balance the Quest for Revenue with the Quest for Equity

by | Jun 23, 2015 | Business

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Every business, regardless of the development stage, has a purpose: to generate wealth for shareholders. During the startup phase, the pursuit of capital can sometimes eclipse other equally important activities that will help lay the foundation for future business viability and growth.

There are no hard and fast rules, and what works well for one startup may not work for another. However, it can be helpful to keep an eye on the balance between your quest for equity and the quest for revenue generation. Here are some suggestions to help.

Realize the Value of Control
The idea of handing over equity to investors can develop into “shiny object syndrome” if you’re not careful. The possibility of immediate cash in the bank can blind you to what you’re really giving away in the equity investor contract. As you build your startup, revenue starts to roll in, you expand and establish some strong roots, the value that can accrue to you, as founder and majority shareholder, may increase well beyond anything you envision today.

Pick Partners You Can Learn From
Startups can often benefit from looking to other individuals or organizations that can fill in some of the skill or knowledge gaps that may exist on the founder team. A marketing firm, for example, may help to drive leads in a way you may not have thought of previously. Anywhere you can team up – without giving away equity – can help you gain traction and start building robust revenue streams as early as possible.

Focus on Sales, Practice Your Pitch
Generally it is true that your business can’t survive if you can’t sell your product. You might be the most business savvy finance genius with a brilliant startup idea, but if you have no experience in sales, don’t have the knack for it or the time to learn, this might be an area to get help with before you start looking for investors. Going through the process of developing and delivering sales pitches – even if you don’t close many at first – can also give you valuable business insights that you can address, and improve upon if appropriate.

When you are ready to bring on investors, let the experts at help you verify your investors are accredited, as required by law.

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