My entrepreneur clients often ask me how to raise capital. My first response is the same response I give entrepreneurs when they ask me to help them issue stock to an employee: Do you really need to?
Just like I advise business owners to not issue equity to an employee unless absolutely necessary, I advise business owners not to take on investors unless absolutely necessary.
Why? You tend to make better decisions when you have a tight budget. The “extra” money you get from an investor tends to lead to sloppy decision making. “Oh just buy it, we can afford it” verses – “do we really need that, is there a better and less expensive way to do that?”