Step 1: Have your big, amazing, awesome business idea.
Step 2: Raise money.
Step 3: Go forward with your big, amazing, awesome business.
But then, bummer for you, because at some point, and often only with hindsight, you’ll realize you took one vital misstep: You thought money was money. And it’s true that it’s all green (well, in the USA it is), and it spends the same. But, here’s the catch: Money always comes with strings attached.
These strings need to be understood. One way is to think of the strings as labels written precisely in the language of your investor and attached to each cent they invest. These strings are what the investor cares about, why they’re investing money, and what they want. If it isn’t immediately obvious, do the homework and figure it out. You want to be speaking the same language. You want your investor’s strings to align with your principles, values, and goals. And you need that alignment more than you need misaligned money.
If they don’t align, which is often the case when you take whatever money you can get, you will have established one potentially fatal flaw in your big, amazing, awesome business. When things get difficult, the strings of the money yank you in one direction, your investor’s priorities, while your principles or character are pulling you in another. Fissures are created and, whether it rips the company apart the first time or just weakens the foundation making the company vulnerable to the next (inevitable) shock-wave, the stage is now set.
If you are trying to create an earth-friendly operation and you get money from big oil, well, you might as well kiss your greener pasture plans goodbye. Clearly such misalignment would be obvious. It’s the nuanced misalignment that can be tricky to identify. If your capital investor expects profits short-term, a founder’s decision to focus on slow, smart growth gets negated quickly. If the founder wants to make the world a better place, but takes capital from an investor that solely wants their corner of the world to be a richer place, then the conclusion of the story is foretold then and there.
Alignment is always in the secret sauce of the companies that win. Just as creatively and carefully as you hatched your business plan, work to consider who your best investors are. Look for people who align with your vision and your plan, who believe in what you are doing AND how you are planning to do it. An example of one such organization is the Slow Money Institute. Organized around an economic principal of “bringing money back down to earth,” Slow Money has become a catalyst to direct capital to organic farmers and food entrepreneurs via dozens of local networks. Since 2010, they have invested more than $57 million in over 600 organic farms and food enterprises nationwide.
At Farmers Restaurant Group, the money invested in our restaurants comes with strings attached – strings connected directly to the North Dakota Farmers Union. For us, we have a contractual obligation to run the restaurants with a long-term view, spreading the messages and priorities of independent American family farmers, with the goal of directly and indirectly increasing demand for family-farmed products, all while pioneering a business model that gives farmers a greater share of the food dollar. So we have strings attached. Our strings mean that we cannot go off the rails that we initially built and initially aligned when we envisioned and formed the company. We can’t prioritize profit above mission. We can’t start using lower quality products just because it’s easier and more profitable. We can’t stop composting and recycling just because it is complicated. The list could go on and on, but you get the point.
When you are raising capital, look for the strings. Get money that aligns with your culture or the culture you are trying to create. Starting the company from the very beginning with what I call "poisoned seeds" will only produce an underlying sickness that can never be treated. On the other hand, starting the company with like-minded investors adds essential nutrients to the soil you are tilling so you can grow a healthy enterprise. And have that big, amazing, awesome business.