Three Futures: Should You Raise Capital
This article is part of our series on the three futures all business owners confront. Click here to return to the front page.
You’re not selling (yet), but you’re not standing still either
Raising capital sounds like a tactical decision: get money, grow faster, win. But the deeper question is whether inviting someone else to your table will move you closer to the future you actually want.
That’s the common theme across all forms of capital: debt, equity, minority investments, or majority recapitalizations. You are giving someone else a say. The question is, are you ready for that?
Let’s unpack what that means and how to know if it’s the right move for you.
Why Owners Raise Capital
First off, there are good reasons to seek capital. Some of the most common:
You see a clear growth opportunity and need fuel to chase it.
You want to take some money off the table without exiting entirely.
You’re tired of carrying all the personal and financial risk.
You’re entering a new phase and want a more passive ownership role.
It’s not always about expansion. Sometimes it’s about stabilization, succession, or setting the stage for a long-term plan.
But underneath those reasons is a deeper one: the feeling that your business is constrained by its current resources, and unlocking outside capital might be the key to your next chapter.
That might be true. But the kind of capital you raise, and from whom or what, can lead to very different outcomes.
First, Know Who or What You’re Inviting In
Raising capital always means inviting someone new to the table.
That’s true whether it’s a lender who wants a security interest or a board seat, a private equity firm seeking an exit in five years, or a family office that takes a quieter, longer view. They each bring different expectations and involvement.
Many owners say they want “quiet money,” a hands-off investor who provides cash and lets them run the business. But in practice, that kind of capital is the hardest to come by. Almost all capital comes with strings, and the key is knowing what those strings are and whether you’re comfortable with the trade-off.
Let’s Look at Your Options
Bank Debt
Traditional debt is often the simplest and least dilutive option.
Banks lend when they’re confident they’ll be repaid. That confidence comes from strong cash flow, steady margins, and tangible collateral. If you’re an asset-heavy business, like manufacturing, transportation, or construction, you may be able to secure meaningful debt on comfortable terms. But for asset-light companies like marketing firms or SaaS providers, it can be a much harder sell (fun fact: our family business was in the travel agency sector, an industry that could never secure any bank debt if its life depended on it).
Personal guarantees are often required. That means if the business can’t repay the loan, the bank will personally come knocking on your door. In return for that risk, you retain 100 percent of the upside. Debt can be a powerful tool, but it demands discipline and a strong balance sheet.
We’ll explore the difference between secured and unsecured debt in a separate article.
Minority Investment (Equity)
This is where an outside investor, such as a private equity firm, family office, or strategic partner, buys a non-controlling stake in your business. You get capital to grow, and in theory, maintain control.
But control can become blurry. Most minority investors will ask for some governance rights, like board seats, veto power over big decisions, or structured exits. And if future rounds of capital are needed, you may lose negotiating leverage.
Still, this can be a great path when structured well. You stay in the driver’s seat, but with a co-pilot who brings capital, insight, and sometimes access to broader networks.
The key here is alignment. A family office might be willing to hold for 10+ years and collect dividends. A traditional private equity fund likely needs a liquidity event within 5 to 7 years. Understand who you’re partnering with, not just the check they write.
Selling a Majority Stake (Recap or Full Exit)
This is often how private equity enters the picture. You sell most or all of your business and retain a smaller share by “rolling equity” into the new structure. That means you reinvest a portion of the proceeds into the company after the deal, walking away with less cash upfront.
Why do it? Because the second exit comes with the promise of even greater upside. The first sale gives you a pro-rata payout of your original business. If the business grows and sells again, your smaller stake in a much larger business could create a meaningful second payday.
That’s the model: two exits, one major aggregate return.
But make no mistake: selling a majority stake is effectively selling the business. Even if you stay involved, you’ve handed over control. The direction, decision-making, and timeline now rest with someone else.
Whether that full exit happens today or later, it’s still happening.
Still not sure if you’re ready to sell, even partially? Read our guide: Should You Sell Your Business? Raising capital from a private equity buyer often ends in the same place.
Venture Capital
This form of capital is typically reserved for early-stage, high-growth companies chasing huge markets. If you’re an established, profitable business with slow and steady growth, this isn’t your lane, and that’s okay.
Venture capital comes with aggressive growth expectations, multiple funding rounds, and near-total focus on a future exit (IPO or sale). It works for some, but the tradeoffs are real. Most businesses don’t fit this mould and don’t need to. If you want to learn more about Venture Capital, read our article digging into the topic.
What Raising Capital Won’t Fix
Sometimes owners explore capital raising because they’re frustrated, tired, or stuck. If you’re feeling burned out, new money probably won’t solve that. It might even make it worse.
New partners mean new expectations. Reporting requirements. Faster timelines. Less control. If what you really need is rest, restructuring, or a clearer vision, fix that first.
Here’s a deeper look at that crossroads: The Three Futures: Should You Sell, Raise, or Transition?
What If You’re Holding On for Your Kids?
We hear this often: “My kids are going to take over, just not yet.”
Be careful here. If you raise equity capital now, you may be reducing the ability of your children to gain control in the future. They’ll inherit a business with increased complexity, more outside voices, and a likely defined exit timeline that wasn’t their idea.
If succession is the goal, raising capital can sometimes make that more complicated, not easier. There may be better tools, like structured family buyouts or staged ownership transfers, that keep the door open for your next generation.
Final Thoughts
Raising capital can be a powerful way to grow, take risk off the table, or reshape your involvement in the business. But it’s not a neutral decision. It changes who’s involved, how decisions get made, and what the future looks like.
If you’re clear on why you want to raise, and what you’re willing to give up, the right partner can help you unlock value you couldn’t reach alone.
Just make sure you’re solving for the outcome you truly want. Not every future requires someone new at the table.