“Money often costs too much.”
— Ralph Waldo Emerson
There is more to life than equity. Businesses will normally have access to a variety of different types and sources of finance. The trick is in learning to combine these to create financial stability and maximise shareholder returns.
It may seem counter-intuitive but, in a successful business, external equity is likely to be the most expensive source of finance. It will ultimately create value for the investor far in excess of that available from deposits or similar investments and will deprive the founder of this value. From the founder’s perspective, this may represent a significant and unwelcome opportunity cost.
In addition, ...