EVEN IN THE BEST OF TIMES, DO THE WORK: HOW TO PICK THE RIGHT CAPITAL PARTNER.

• Author: Stohlton, Brett

For more than a decade now, the Fed has stimulated the US economy by printing unprecedented sums of money and pegging interest rates at zero. In turn, asset prices have increased as more dollars have chased a similar number of assets. And as bonds yield close to zero, investors are tunneling more and more capital into riskier assets in search of higher returns.

The year 2021 eclipsed venture capital and private equity records, as both spaces nearly doubled their 2020 figures. In short, it's never been a better time to be an entrepreneur and raise capital. Amid so many new drivers of deal activity, entrepreneurs have begun to consider bringing on partners/investors to strengthen their balance sheets and add value to their organizations. Yet some of them make a reflexive decision based primarily on price. Optimizing for price may be effective if you're selling to exit a business, but if you intend to build your company and continue investing in it, the quality of your partnerships warrants greater focus.

Jim Collins, in his book Good to Great, posits that "the most important decisions that business people make are ... who decisions." When it comes to choosing an investor, the "who" is always as important as the "what" or the "how much." A higher price cannot compensate for the brain damage you incur from working with a difficult partner. Conversely, a few percentage points cannot compare to missing out on someone who is more enjoyable to work with.

Any entrepreneur concerned with picking the right capital partner should adopt these three simple principles:

1. Assess fit. Take a close look at both your business and your personal needs. Ask yourself, "Is this investor some one I would enjoy working closely with? Are we aligned in terms of my vision for my company and my personal values?" If you don't have strong overlap with this person, you're setting yourself up for significant pain.

2. Consider business needs versus...