Thought of the Day: When in doubt borrow $$$

The other day I had coffee with an entrepreneur whom we’ll call Shai. Shai was entertaining me with good, and not-so-good, stories about his experiences learning the ropes in the new media business in the U.K.

One pearl of wisdom stuck out.
Shai recalled a period at his last venture where he had grown panicked about his debt-level. You’ve probably been there: already in hock for a few grand more than he was comfortable with; not yet cash flow positive; yet Shai’s company was at a critical inflection, where he needed to ramp things fast to get to cash flow positive.

Shai figured his choices were few. He could: sell equity to raise money; take on a partner and change his b-model entirely (which he didn’t want to do because he “still believed” in it); sell out; or, shut it down. He sought out a mentor to help him choose.

And this is when his mentor tells him:

“Don’t be stupid. Borrow more. At $20,000 in debt, if your business model doesn’t work, you are in trouble. At $2,000,000, if your business doesn’t work, the bank is in trouble.

I just love this advice. Shai says sit was one of the best bits of wisdom he received. Why? Because it helped him see his venture outside of the bounds of his own attachment to it. Think about it. Bankers are responsible for their decision to lend to you!. So, it’s not all about you. The sooner you stop personalizing things the easier your decisions, especially the very hard ones, will be.

What a great perspective to have.