Beware bad partners bearing cash

I met with a successful consumer products entrepreneur today, and he told me how he spent the past few months unwinding a partnership–complete with legal costs, wasted time, and frustration.

Long story short, he took investment capital from a wealthy person with nothing to do and a desire to be involved in running the business. That person proved to be a lousy operator and awful partner. The story made me cringe, not only because I’ve heard it before, but because I made the same mistake many years ago.

I know, I know, you need capital now to start–or preferably to grow–your business. But be very careful about mixing investors and partners / employees. Think about whether you need to fill a specific role on your management team. Then profile the skills and experience of your dream candidate for that role. Before you even consider having an investor fill the role, be sure they are a great fit, and that they’re someone you know very well , trust, and want to work with every day.

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2 Responses to Beware bad partners bearing cash

  1. Terri PC says:

    Could you give any advice to a family that’s considering creating a “Family LLC”? A legacy for generations to come.

    The idea is to build and maintain a cash reserve to fund various projects the family members vote on; real estate investments, established or potential business ventures, etc. Instead of having the venture capital coming from an outside source, the funds would come from within the family; from family members dedicated to propering the venture.

    Tell me what you think as I am not business savvy and I’ve been twittering others in the business community for their ideas, advice, etc.

    Thanks,
    Terri PC

  2. jchunter says:

    Terri, I’m not business savvy either, but I remember one of the core rules of starting a business is not to start one with family members…sorry…

    On another note, my long time friend just started a venture funding business to give advances to small businesses, I like the concept he’s working with – http://www.ccafunding.com

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