You’re selling your equity, not giving it away!

One of my pet peeves about entrepreneurs is that they very often speak of “giving away their” equity when they raise capital. They aren’t giving away anything!

Here’s the CEO of liquor delivery company Drizly quoted in the Boston Globe today.

“This is the right number for us given the climate. It allows us to make the investments we want to make, without having to give away more of the company than we want to,” Rellas said.

They are selling their equity! This may not seem like a big deal, but this attitude creates a less than optimal mindset when it comes to raising capital from investors.  Raising capital needs to be approached much like any other B2B sales opportunity: generating leads, qualifying leads, making the pitch, overcoming objections, negotiating the deal (including Ts and Cs), closing the deal – and often forgotten, post-deal customer support.

The idea the founders are “giving away” equity also doesn’t help educate employees about the investment process, which is already opaque enough and threatening enough to employees as it is.

The more entrepreneurs approach raising capital as a sales process – where they are selling their equity to qualified customers (VCs or angels) the more likely they will maximize their opportunities and manage the process for the best outcome.

Author: Mentorphile

Mentor, coach, and advisor to entrepreneurs, small businesses, and non-profit organizations. General manager with significant experience in both for-profit and non-profit organizations. Focus on media and information. On founding team of four venture-backed companies. Currently Chairman of Popsleuth, Inc., maker of the Endorfyn app for keeping fans updated on new stuff from their favorite artists.

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