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Just turned down partnership in a company with 7 figure multi-year contracts. Am I crazy?

Sharko

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I was recently approached by a company that works in the hospitality industry, to invest cash (6 figures) into their established 3 year old company in exchange for 40$ ownership. This cash infusion was to help in funding a multi year, multi-million dollar contract they had just acquired, my cash would fund hiring, materials and retention. Projections hinted at a 7 figure return for me over 5 years.


After a couple nights of thinking I declined.


The cash wasn’t the issue. I was emotionally detached from the money.

My decision was based on the fact that I wouldn’t have CONTROL of the business.

I have a decent relationship with the owner of said business (known for about 10 years give or take) but it was hard for me to stomach somebody else making decisions with my money for me. I would have had minimal voting rights.


I have decided instead to funnel this money into growing my current venture, which is doing 7 figures yearly and is projected to hit 8 figures in the next 3 years. I just feel if it doesn’t make CENTS it doesn’t make SENSE.







Am I crazy?
 

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Merging Left

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Option 1: Invest xxx,xxx and see x,xxx,xxx return, with no control over whether the right decisions are being made
Option 2: Invest xxx,xxx and see x,xxx,xxx return and be in full control over your vehicle.

Your opportunity cost for investing in your friend's company is potentially millions of dollars NOT earned in your own venture.
Your opportunity cost for investing in your own venture is potentially millions of dollars NOT earned investing in your friend's company.

You're positioned to win millions either way. You could make the argument that because you have more control in your own venture, your risk of loss is mitigated (i.e. you trust yourself more than you trust your friend to make the right decisions). You could also argue that because you retain 100% ownership in your venture (I'm assuming), your long-term potential for gain is greater.

Based on those inputs, your decision was correct. The variable is the likelihood (and magnitude) of success - is your friend more likely to succeed than you? You feel that no, he is not. Is his business likely to become larger than yours (i.e. your 40% stake in his > your 100% stake in your own)? You feel that no, it is not.

You're not crazy at all.
 
OP
OP
Sharko

Sharko

Bronze Contributor
Speedway Pass
Apr 17, 2015
58
232
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Option 1: Invest xxx,xxx and see x,xxx,xxx return, with no control over whether the right decisions are being made
Option 2: Invest xxx,xxx and see x,xxx,xxx return and be in full control over your vehicle.

Your opportunity cost for investing in your friend's company is potentially millions of dollars NOT earned in your own venture.
Your opportunity cost for investing in your own venture is potentially millions of dollars NOT earned investing in your friend's company.

You're positioned to win millions either way. You could make the argument that because you have more control in your own venture, your risk of loss is mitigated (i.e. you trust yourself more than you trust your friend to make the right decisions). You could also argue that because you retain 100% ownership in your venture (I'm assuming), your long-term potential for gain is greater.

Based on those inputs, your decision was correct. The variable is the likelihood (and magnitude) of success - is your friend more likely to succeed than you? You feel that no, he is not. Is his business likely to become larger than yours (i.e. your 40% stake in his > your 100% stake in your own)? You feel that no, it is not.

You're not crazy at all.
I am 50% in my main venture, but yes this is pretty much what I was thinking!
50% in a proven venture that I am already balls deep in, and have built to 6 figure revenues monthly, with 35-45% margins is much better than 40% in an unknown, where I have zero domain experience, for potential 20% margins.
 

Bdenner64

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Projections hinted at a 7 figure return for me over 5 years.

The cash wasn’t the issue. I was emotionally detached from the money.

My decision was based on the fact that I wouldn’t have CONTROL of the business.

I have decided instead to funnel this money into growing my current venture, which is doing 7 figures yearly and is projected to hit 8 figures in the next 3 years. I just feel if it doesn’t make CENTS it doesn’t make SENSE.

Am I crazy?
You act according to your own values.

You've decided to reinvest into something YOU control.

The thing that you control is primed for HUGE growth.

With all that being said, no. You are not crazy. If money truly isn't an issue then sounds like you're already doing just fine. So does it really matter if you potentially miss out on a few more bucks in this company?

That's my take on it
 
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OP
Sharko

Sharko

Bronze Contributor
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Apr 17, 2015
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You act according to your own values.

You've decided to reinvest into something YOU control.

The thing that you control is primed for HUGE growth.

With all that being said, no. You are not crazy. If money truly isn't an issue then sounds like you're already doing just fine. So does it really matter if you potentially miss out on a few more bucks in this company?

That's my take on it
Agreed 100%. Just not willing to put the time into a vehicle that I do not drive!
 

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