FIRMS considering angel or venture capital investment should always think very carefully about the long-term implications for their business and what changes there might be as a result.
That was the key message from Sir Tom Hunter to a caller on the Go Radio Business Show with Hunter & Haughey yesterday.
“Whenever people are taking on investment, I get them to pause and ask them what are they giving up by taking on outside capital,” he said.
“Money comes with strings attached and there is no way people can take money into their business and things won’t change.
“The investor is doing it for a return in a prescribed piece of time so all the awkward questions have to be dealt with upfront.
“You need to ask yourself ‘why am I taking up this investment and what am I giving up to do it’.”
Meanwhile, Lord Haughey highlighted the importance of getting the calculations right, saying: “If you are convinced that by having some outside capital that you can grow the business and it is going to add value, then don’t look at it as if you are giving away a percentage of your business – always look at what the cash and the bottom line is.”
Returning to the “emotional” part of having an outsider coming into your business, Sir Tom said it was important to consider how that might change the culture of a company.
He said: “How much of a say will they want, will they change the culture – will they add something to the business, will they interfere?
“It could be really good or it could be really bad.”
On the positive side, he suggested that having a “critical friend with business experience” could be beneficial for the long-term future of the business.