Loss of control. The drawbacks associated with equity financing in general can be compounded with venture capital financing. You could think of it as equity financing on steroids. With a large injection of cash and professional – and possibly aggressive – investors, it is likely that your VC partners will want to be involved. The size of their stake could determine how much say they have in shaping your company’s direction.
Minority ownership status. Depending on the size of the VC firm’s stake in your company, which could be more than 50%, you could lose management control. Essentially, you could be giving up ownership of your own business.
Bottom line: Would you rather own your own business or partner in a larger, potentially more successful one?