Isabella Hermann-Schön

In the current state of the world most companies are struggling to cope with decreasing or imploding revenues and many are facing very tight liquidity situations. Although there is generous government support available in most of our target markets we see numerous entrepreneurs searching for additional private capital, usually equity. In a market turmoil and period of high uncertainty like this equity comes at a high price if it is accessible at all. Entrepreneurs will spend a lot time ensuring financing instead of managing their businesses. 

Even if the health crisis may be overcome in a couple of weeks or a few months it will take us much longer to recover from the economic impact, so adjusting cost structures and organizing a financial buffer makes a lot of sense. 

At some point however there will be a recovery and (potentially huge) growth opportunities for your business. Then you want to reap the profits of the venture that you have captained through a storm like the current crisis. There may be partners who have accompanied you on the way that will get their share as well. However, you should ask yourself, whether it is currently the right decision for you and your company to bring onboard equity investors who leverage this crisis to get a large share of your company at a low valuation.

There are non-dilutive ways such as revenue-based loans to finance growth companies with a preferably SaaS business model. The loan amount can be increased as your revenue will grow again and thus will support you in the scale up after the crisis. 

Don’t sell your future potential too cheap now!