The Need for a Backup Plan

One of the casualties of the Financial Crisis was a rupture in trust and credibility in the business world. As Bear Stearns and Lehman folded precipitously, and allegedly investment grade assets unraveled in value, the world was confronted with greater risk and greater volatility in investment decisions. This has made it harder for people to know whom to trust in the business world. Many brilliant business writers have explored this topic and have concluded that a byproduct of the great financial crisis is a trust and credibility deficit.

What does this mean for you who are about to raise capital or sell your business? It means

  • That there is a much lower probability of closure now than there was several years ago
  • That the investor sitting across the table from you is probably hedging his bets that your deal won’t close for any number of reasons and has several other deals in his pipeline that he can close if need be

I do not find fault with this approach as the deal business is a world of dismal probabilities, even in the best of environments. What it does underscore though is the need for multiple options for your deal and acquiring Growth Capital. Don’t fall in love with the investor who is saying all the right things at the first meeting. Don’t think that because you have done business in the past with someone that they can deliver again this time. Be cautiously optimistic about all of your options. But above all, have several different paths of getting to the finish line.