If you’re looking to raise money for your business, you should think long and hard about whether you’re taking Dumb Money or Smart Money.
Dumb Money is where the investor brings nothing else to the table except the money itself.
Whereas a Smart Money investor brings the money but also adds value to the business in other ways.
It may be that the investor brings with her lots of contacts and connections that can help your business grow. Perhaps the investor has a specific set of skills that will help your business. Or maybe the Smart Money investor has other businesses which could add strategic value to your business – with a distribution platform, for example.
Smart Money is obviously preferred. But sometimes Dumb Money is the only option you have.
In that case, Dumb Money is ok. Just be sure you don’t give away too much equity in your business too early to a Dumb Money investor. You may live to regret it in the long run.
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