Photo: Jim Estill
Before you schedule a meeting with investors, Jim Estill says you should ask yourself a couple of questions:
1. Do you need it?
2. Is it the best use of your time?
3. Are you truly an R&D company and doing real R&D?
4. Do you need to scale quickly so that no one else steals the market?
Estill says that R&D companies should raise money because they have to hire engineers and designers.
For example, it makes sense for a company like RIMM to raise money. Or if your company needs to gain a massive audience quickly — such as Facebook or Twitter — before leaving an opening for anyone else to come in and steal the market.
“There’s nothing wrong with going out and selling a product, but the problem is that most people don’t go out and ask the questions. For many of the companies I see, it’s a disaster to have investors. You’re using up equity, you’ve been diluted down and now you only own 10 per cent of the company.”
When Estill first started his own business selling technology parts out of the trunk of his car, he was able to secure a $200,000 investment from his father.
But he never received money from any investors, which he tells us “gave [him] more discipline.”
Fifteen years after starting his company, Estill was bringing in $68 million in sales and decided to go public.
“Being public allowed me to borrow more from the bank and allowed me more leverage. It’s strange but people were always like ‘Oh, you’re more legitimate now because you’re public.’ That said, I wouldn’t recommend it to everyone.”
Today, he’s invested in more than 100 companies as an Angel investor, but still believes that entrepreneurs should seriously consider what’s best for their companies before trying to raise money.
“I was able to grow my company as much as I did because I was able to grow it slowly,” he says. “But in this day in age, people are in love with raising money.”
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