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Partners and Investors: The Inside Story on Outside Investment
Business growth often requires outside funding. Working capital is required for daily operations. Partners and investors provide expansion money, experience and skills to grow your business.
On the other hand, partners and investors are stakeholders that sometimes create problems - big problems! A partner maintains an ownership stake, and participates in company decisions, depending on the partnership agreement.
Investors simply provide funds in exchange for an ownership stake or future return. Typically, a partner takes on a company role, while an investor simply provides an infusion of cash.
Investor or Partner?
Seek an investor if you need to:
Seek a partner if you need to:
Having a partner may not be easy. A partner shares in decisions and responsibilities. Find a partner whose skills complement your own to ensure harmony in those decisions and responsibilities.
Since an investor creates less daily stress for a business owner, this is the way to go if you don't want to cede control of "your baby."
Investor Pros and Cons
Many people and institutions invest in small and mid-sized companies: banks, friends, family, private investment groups, venture capitalists, government agencies and even suppliers or vendors.
Family and friends are typically "silent" investors who receive a financial return but don't take control of the business. Venture capitalists (VC) are more likely to require a formal role in making business decisions.
Partner Pros and Cons
Partners' funding, while important, is just one factor in determining whether they're the right choice for you.
What should you look for in a partner?
If you simply need funding, look for investors or lenders and maintain control over your business.
If you need funding and complementary skills, or you want to share the burden of running a business, then a partner provides both financial and human capital.