20
January
2016

When Working Capital Funding is BETTER than Venture Capital Funding

Whether you’re an avowed Shark Tank fan or not, the fact is that many startup and small business owners dream of getting that magical email or phone call – the one where they discover that a well-heeled venture capitalist (VC) is interested in “discussing a funding partnership”.

However, while VC funding can be something of a magic wand for some businesses, it’s NOT a fairy tale for all of them. In fact, more often than many people realize, VC funding turns out to be a disastrous move. As startup veteran Chris Zaharias told BusinessInsider.com: “Investors, founders and the law firms they work with systematically & ruthlessly exploit startup equity information asymmetry to their gain and employees’ pain.

What’s more, the pain that Zaharias refers to is not limited to folks on lower rungs of the organizational ladder. As Entrepreneur.com notes, many startup founders find themselves on the outside looking in within a few years of accepting a VC deal – either because they’re obliged to hand over the CEO reigns to another board member from their VC, or because they get handed a pink slip.

Now, the idea here isn’t to suggest that VCs are the enemy. As noted above, they can and do help many businesses stay afloat, get to the next level, and fulfil their potential. Obviously there are strings attached, but sometimes strings are better than the alternative: being eaten alive by high costs and the competition.

Yet in many other cases, opting to go the VC route is essentially the beginning of the end. And that’s where a working capital loan from Mulligan Funding can make all the difference!

With a working capital loan, you are in FULL control over how you choose to allocate the funds. You aren’t obligated whatsoever to ask our permission or even our opinion (though if you want to run a plan or idea by our Funding Specialists, we warmly invite you to do so).

Furthermore, you will not be crowded out of the CEOs chair, because unlike VCs, we do not take – nor want – an equity position in your business. We know that the best person to lead your business and make it successful and profitable for the long-term is YOU; not some VC employee who may indeed be intelligent and accomplished, but has a roster of partners in their portfolio of which you’re only one. Having someone who can only focus 4-5 hours a week on your business second guessing your strategic decisions is a bad idea. But then again, we don’t need or want to “babysit” our money. We trust that you know what you’re doing.

Additionally, here are some other reasons why you may agree that, for you, a working capital loan is a better option than VC funding:

  • You automatically pay back a small, fixed amount each day – which simplifies administration.
  • You can pay your loan back earlier if you wish, and there is no pre-payment penalty.
  • If you need additional funds, you can apply for a second working capital loan while your first is still active.

The Bottom Line

If a smart and helpful VC group calls or emails with “an offer you cannot refuse”, then by all means: go for it. VCs play an important role in the lending marketplace; especially since banks have all but given up on startups.

However, if you find that competition for VC attention (let alone funds) is ferocious, or that a VC interested in partnering with you is adding a few more strings than you find agreeable – including those that could have you literally pushed out of your very own startup within a few years – then call Mulligan Funding at 855-326-3564 to discuss your financing options today!