Guest Speaker - John Dimmer

Funding; one of the driving forces to taking a business to new heights. John Dimmer opened my eyes to the importance of gaining enough capital for your company to take it where you want it to go. Special attention should be taken in this since it can help in expanding your company or causing you to lose your part in it. This is because too little can lead to running out of funds before achieving key milestones, while too much can lead to selling yourself out of an ownership interest in the company at too low a price. It all depends on the financing source you make use of since they each have their own benefits and drawbacks.

Debt doesn’t dilute ownership percentage, but it is often difficult for start-up businesses to obtain. Equity is the largest pool of funding for start-up businesses, but by taking on equity investment, you give up partial ownership and, in turn, some level of decision-making authority over your business. Other financing sources include prize money from business plan competitions (since it is non-taxable free money), governments grant known as SBIRs, money available under veteran’s programs, crowd sourcing, and a few other methods. Benefits of these are that there’s no repayment obligation like debt and no ownership dilution like equity, though these methods can prove to be time consuming and only nominal funds are available.

Gaining investors in a company through shares is a very common thing. Generally, though, they never want anything to do with Sub-Chapter S Companies since they eliminate many Angel investors and VC’s who use LLC’s as their investment entity. The corporation’s investors prefer are “C” Corporations and LLC’s since they provide liability shields for the investors. It is important to note though that once your ownership drops below 50% you lose control of the company so it is necessary to plan out how many times you plan to raise and where you want to make use of your exit strategy if that’s your reason for building up the company.