There are very few businesses past or present that would not have considered finding additional funding for various reasons. Depending on the personality and vision of the individual business owner, one option might be strategic equity funding. This type of funding best suits the entrepreneur who wants to maintain control and guidance of his business endeavor.
Strategic equity funding is usually secured through groups with a like minded business model. These groups are looking to further their own products. For instance, the investment group manufactures Gizmo Alpha and needs a widget to produce the gizmo. Widget Delta Company makes the widget they need, but not in the numbers they require. It is in Gizmo Alpha Company’s best interest to invest in the widget company so that it can expand production to meet their needs, thereby enabling them to put more Gizmo Alphas out there for purchase by the consumer. This kind of funding is a win-win situation for both the investor and the business receiving the investment funds as it increases the bottom line for both.
Another thing to know about strategic equity investment is that it is attractive to many business owners looking for funding because it allows them to maintain control of their business. Other types of funding require the business owner to relinquish a controlling interest in the ownership of his business, in effect handing the reins of his business over to someone else. As you can see in the example given, the owner of the gizmo company isn’t interested in running Widget Delta Company. He simply needs a dependable and capable supplier so that he can get his product into the market and make a nice profit. Luckily, he has done well and has equity in his company so that he can strategically invest it to help his company’s bottom line. The owner of the widget company didn’t start his business just to let someone else step in and take over. He is however very interested in increasing his profit. By securing these funds he is able to increase production of his widget and at the same time is assured of a buyer for the increased production, all the while keeping the reins of his business securely in his own capable hands.
For the hands on business owner who is in need of additional capital to expand his business or otherwise enhance it, strategic equity investment is definitely something to consider. It offers the additional capital needed to accomplish a goal without the attached strings of other types of investment that require the relinquishment of control most business owners do not want to give up.