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MONEY

3 Reasons to Take Outside Funding

Venture Capital firms and private equity funds have more to offer than money. Here are three ways these institutions can help your business.

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Even though I did not end up going the route of institutional funding with Happy Family, I still strongly considered it at many points on my entrepreneurial path. In fact, I most likely would have signed with a private equity firm during one of the (many) times when I felt desperate if funding had not serendipitously fallen into place. Below are the three biggest pros of funding your small business with institutional help:

1. Relationships

Venture Capital firms and private equity funds have many advantageous relationships with all sorts of people who can be a resource to you. Often times, these relationships can be very good and propel your business in a way that you could not propel it on your own.  These relationships are a natural outcome of the business that VCs are in: they invest in small companies for a living, and they do it with people that they know and trust.

In so many ways, this really works. For example, a VC-funded company could reach out to the owner of a supermarket chain that they have a relationship with through the VC and get prime shelf placement at that chain, giving that brand a competitive advantage over other, more established brands. Happy did not have this type of support. Of course, the process would have gone a lot faster if we had been able to leverage a VC relationship.

2. Experience

Venture Capitalists know what they're doing. They know what works because they've done it before with so many businesses. As an entrepreneur, you think your business is special, that it's different; but no matter how special the product or service is, VCs and private equity funds see your company as just another business to grow, another problem to solve.  Because they've seen so many businesses play out their stories, they have been able to identify patterns (especially patterns that you may not be aware of) and apply those patterns to your business. Experience is valuable, and to be able to apply that to your business can help it grow healthily.

3. Singular Motivation to Succeed

VCs and private equity funds are 100% dedicated to seeing you succeed because that's how they earn a living. Ultimately, money is their bottom line, and they are there to make sure they get a financial return on their investment. This financial goal gives you, the entrepreneur, a focused and very disciplined approach to making the most fiscally sound decisions. Of course, when you sign with a VC/private equity fund, you may also sign away some of your control in the name of fiscal conservatism; but you also ensure that your business has a strong safety net to continue to be viable.

IMAGE: Getty Image
Last updated: Oct 17, 2012

SHAZI VISRAM is the founder and CEO of HAPPYFAMILY, the leading premium brand of baby and toddler meals in the U.S. HAPPYFAMILY is sold in over 13,000 stores with 9 different lines of optimally delicious organic foods.
@shaziv




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