Technology Buyers Risk Getting Burned by Vendors Who Take Outside Funding

Technology Buyers Risk Getting Burned by Companies Who Take Outside Funding

I often write about business and values from the point of view of the CEO of a privately held company. And as a business owner, I take great pride in using a business model that I believe delivers the most value for our clients. That being said, I am the first to warn of the “evils” of Private Equity or Venture Capital backed business models.

My software company, Synthesis Technology, is frequently pursued by a range of PE firms.  Our latest recognition by Inc. Magazine as “one of the fastest-growing private companies in America,” brought dozens of these firms out of the woodwork. Naturally they are all interested in a company with a successful business model, a recurring revenue structure, and actual profits.  They all try to get the door opened by offering “growth equity” and being willing to give the founders the opportunity “to take some of their money off the table.”  I entertain a very select few of these advances to make sure I know what the options are and the mood of the industry.  We’ve actually walked away from real offers.

The reason we don’t take the money is two-fold.

One, we don’t exactly represent the type of enormously scalable business most of these outside investors crave.

Two, as soon as there are professional money managers in the mix, our firm’s priorities would have to shift.

And that’s what this blog post is really about; how money and outside investors change a company, and usually not toward the best interest of its clients, employees, or owners.

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