Why We Turned Down Funding
A lot of people ask us, nclud, if we’ve taken funding or investment of any sort. We have grown a bit in the short time or agency has been around, but it was reasonable and responsible growth powered by our dedication to doing great work, not funding.
We hear a lot of people talk about funding and we often question if they know that really means; or why they are really seeking it out. When we were presented with the opportunity; we had to ask ourselves as well!
If you’ve ever been curious how we, nclud, think about funding, check out the latest on our sketchbook:
http://www.nclud.com/sketchbook/why-we-turned-down-vc-funding
nclud, a creative web design agency
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Categories: business, entrepreneurship, nclud
- May 12th, 2008
- 3comments
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Sounds good, I think more people need to realize that mega-sizing something isn’t always the answer. What works good as a small group might fall apart if made large. That’s even more true of it’s made large very fast due to third party requirements, like VC returns on investment.
Now some business would need at least a little funding (typically a small business loan) to get started, but it’s great your group could do it from day one without any help that’s unusual.
I totally agree that funding is often times very appropriate and very necessary. We may take funding yet; but the big thing to remember, don’t take it, seek it out or even romanticize about it until you actually need it. Funding or even a loan are not things to aspire to; they are helpful resources to utilize when needed to help accomplish a much bigger dream — don’t let funding be the dream, only a way at getting to the dream.
Been there and done that several times, and it turns out it’s very much business specific and the timetable of the product your selling. An exit plan though is also an important talking point, what is everyone looking for, what kind of business structure do you have and who owns the stock and how was the company set up in the first place.
Sometimes it takes too long for the process, or worse people give up the ship for far too little. VC’s and Angel investors are looking for a 10 to 1 or a 100 to 1 return on investment so they try and take an investment control from day one of their investment. That means the inevitable 51% and further which stock is set up for the investor to take, preferred or common, and further is common stock the one’s who run the company.
This has to be set up in the corporation’s bylaws, and I can’t stress that any more than just to bold it. The legal work done in the beginning is vitally important, so important I usually write them in detail first.
My last point is that invariably they take too much for the limited funding needed, so your take on we don’t get Porshe’s is spot on, they don’t want to see their money wasted, and are only interested in whether you not only make money but can grow to a level so they can get their return. That may lead to a sale to a much larger entity that doesn’t have the same vision as you do. On the other hand Google was privately funded to the tune of 300 million and didn’t get theirs until they went public. That however is a huge market that some will be falling off of as they have no real way to pay back the money much less reasonable profits.
Further analysis would require a specific knowledge of how your company works and the sweet spot for it’s growth and viability. Although turning down business, as long as it’s in your profitability model, seems a bit on the naive side, but like I said I just don’t know the circumstances.
Forest