Are You a Venture or a Debt Entrepreneur?

BY AMI KASSAR

This decision is far more personal and emotional than rational.

Last week, I was fortunate enough to attend the @inc5000 conference in Phoenix where I participated on a panel called "Where's the Money!" As a part of the panel, I spoke about debt options and alternatives and another colleague represented the venture and angel community.

Our advice to the audience seemed to be bi-polar. "Only borrow as much money as you need," I said. "You're going to sign on the line personally and have to pay it back." "Raise as much money as you can as fast as you can," replied the venture capitalist. From his perspective, entrepreneurs should build businesses aggressively and quickly.

As I looked out at the audience I perceived some legitimate confusion. I told the audience the story about my very first Inc.com column where I asked the question, "Are you a tortoise or a hare entrepreneur ?" How you choose to build your business will often be directly connected to how you decide to finance it. This decision is far more personal and emotional than rational.

There was part of me that wanted to snap back at the venture capitalist and suggest that "venture entrepreneurs" are not really entrepreneurs after all because they're always betting with somebody else's money. I wanted to align myself with the folks in the room who still owned 100 percent of their fast-growing companies. After all, I thought to myself, no one has really "been there and done that" if they haven't put their house on the line.

The truth, though, is that this is not a black and white issue. Venture entrepreneurs take on a kind of risk all their own. They risk building a company that they don't have control of. And they sometimes risk moving so fast that they can miss important and subtle changes in their business models that you only find when sweating it out.

On the other hand, debt entrepreneurs take different risks. They put their necks and their houses on the line, and they risk being swept away by well-funded venture outfits who might choose to pursue similar business models to their own.

Both the debt and the venture entrepreneur are risking their time, which is after all the one personal asset we all share. So once you've decided to invest the time, think carefully about which funding approach you feel most comfortable with and stick to it. It's almost like the old Apple and IBM debate-- the answer to which machine or approach you prefer is completely up to you.

SOURCE: inc.com