{"id":224838,"date":"2023-10-04T12:59:24","date_gmt":"2023-10-03T23:59:24","guid":{"rendered":"https:\/\/legalvision.co.nz\/?p=224838"},"modified":"2023-10-04T12:59:25","modified_gmt":"2023-10-03T23:59:25","slug":"raise-capital-retain-control","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/startups\/raise-capital-retain-control\/","title":{"rendered":"9 Ways to Raise Capital and Retain Control of Your Company"},"content":{"rendered":"\n<p>Raising capital is essential for the growth and development of any company. However, you may be concerned that raising capital will result in losing control over your company. Fortunately, there are ways to raise capital while also retaining ownership of your company. This article will explore some strategies you can use to raise capital and retain control of your business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">1. Crowdfunding<\/h2>\n\n\n\n<p><a href=\"https:\/\/legalvision.co.nz\/corporations\/equity-crowdfunding-campaign\/\">Crowdfunding<\/a> is a popular option for entrepreneurs who want to raise capital without giving up control of their company. In New Zealand, equity crowdfunding is legal and allows companies to raise funds by selling equity to a large number of investors.&nbsp;<\/p>\n\n\n\n<p>The advantage of equity crowdfunding is that you can raise capital without giving up a significant portion of your company. Instead, you can sell small equity stakes to a large number of investors, which allows you to retain substantial control of your company.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">2. Bootstrapping<\/h2>\n\n\n\n<p><a href=\"https:\/\/legalvision.co.nz\/startups\/bootstrapping-raising-external-capital\/\">Bootstrapping<\/a> is a term used to describe the process of starting and growing a business with little or no external funding. Instead of relying on outside investors, bootstrapping entrepreneurs use their resources to fund its growth.<\/p>\n\n\n\n<p>One of the primary advantages of bootstrapping is that it allows company founders to retain complete control over their businesses. In addition, by not taking on outside investors, you can make decisions that align with their long-term vision for your company rather than the short-term goals of investors.<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>However, bootstrapping also has its disadvantages. One of the most significant challenges of bootstrapping is that it can limit the growth potential of a business. Without outside funding, you may be unable to scale quickly.<\/p>\n<\/div>\n\n\n\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex justify-center text-left gform_input_bg_white    \">\n    <script>\nvar 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Venture Debt<\/h2>\n\n\n\n<p>Another option for raising capital while retaining control is <a href=\"https:\/\/legalvision.co.nz\/startups\/what-is-venture-capital-funding-in-nz\/\">venture debt<\/a>. Venture debt is a type of financing that allows companies to borrow money without giving up equity. Unlike traditional debt, venture debt is typically provided by investors willing to take on more risk in exchange for higher returns.<\/p>\n\n\n\n<p>The primary advantage of venture debt is that it allows you to raise capital without diluting your ownership stake in the company. However, venture debt usually comes with higher interest rates and shorter repayment terms than traditional debt. As such, venture debt should be used wisely and in conjunction with other funding sources to avoid being too heavily reliant on these funds.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">4. Convertible Notes<\/h2>\n\n\n\n<p>Convertible notes are a form of debt that can later be converted into equity. They allow companies to raise capital without giving up equity upfront. Instead, investors loan money to the company. This debt can then be converted into equity if certain conditions are met. A benefit for investors is that the equity they receive will be higher than the debt they invested should your business succeed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">5. Grants<\/h2>\n\n\n\n<p>Some government entities and non-profit organisations offer interest-free grants for certain companies. The significant advantage of grants is that they are non-dilutive, meaning that you do not need to provide ownership or shares in exchange for the funding.&nbsp;<\/p>\n\n\n\n<p>However, one major drawback of grants is that the process of writing and applying for them can be time-consuming. Further, access to such grants is often limited to those working in specific industries or creating social impact.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">6. Utilise Share Classes<\/h2>\n\n\n\n<p>Companies can issue multiple classes of stock, with each class having different rights and privileges. One of the most common reasons why companies create multiple classes of stock is to retain voting control over the company while still raising capital through equity offerings.<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>For example, a company may create two classes of stock. One class may have voting rights, and the other may not. The non-voting shares can then be sold to investors, allowing the company to raise capital without diluting the voting control of the founders or key stakeholders.<\/p>\n<\/div>\n\n\n\n<p>However, there are disadvantages to creating different classes of stock. For example, it can create confusion among shareholders and potentially lead to conflicts between different groups of investors. Additionally, it can make it more difficult for a company to raise additional capital in the future if investors are hesitant to invest in a company with complex stock structures.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">7. Shareholder Agreements<\/h2>\n\n\n\n<p>Another way to retain control of your company is to use shareholder agreements. A shareholder agreement is a contract between the company and its shareholders that outlines the rights and obligations of each party. The agreement can include provisions that protect your control over the company. For example, this might include veto rights over major decisions. Giving yourself veto rights over major decisions is one way to ensure you maintain the most power over your business.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">8. Maintain a Majority Stake<\/h2>\n\n\n\n<p>Another effective way to retain control of your company is to maintain a majority stake. If you own more than 50% of the company, you may have control over major decisions, including approving significant investments.<\/p>\n\n\n\n<p>However, certain situations require a higher percentage of shareholder approval. For example, special resolutions require more than 75% of shareholder approval. Special resolutions usually involve significant changes to a company&#8217;s structure or operations. As such, they require a higher level of consensus among shareholders to pass.\u00a0<\/p>\n\n\n\n<div  class=\"box box--icon box--info\">\n    <p>Regardless, maintaining a majority stake is still essential for retaining control over a company.<\/p>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">9. Board Composition<\/h2>\n\n\n\n<p>Finally, board composition is an essential factor to consider when raising capital and retaining control over a company. The board of directors is responsible for making significant decisions that can impact the company&#8217;s future direction. It is crucial to ensure that the board is composed of individuals who share the same vision and values as the company&#8217;s founders.&nbsp;<\/p>\n\n\n\n<p>One way to maintain control over the board is to limit the number of outside directors and ensure that the majority of board members are insiders, such as founders or critical stakeholders. In addition, by maintaining control over the board of directors, founders can ensure that significant decisions align with their long-term vision for the company.<\/p>\n\n\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2021\/10\/21140438\/NZ-Startup-Manual-251x360-2.png\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">NZ Startup Manual: A Legal Handbook For Founders<\/div>\n            <div class=\"body-text\">\n                <p>Essential reading for anyone building their startup. This free guide includes practical advice and seven real-life case studies.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/NZ-Startup-Manual.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n\n\n\n<h2 class=\"wp-block-heading\">Key Takeaways<\/h2>\n\n\n\n<p>Raising capital is essential for the growth and development of any company. However, it is crucial to do so in a way that allows you to retain control of your company. Some ways that you can raise capital without giving up control of your company include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>seeking funding via crowdfunding, venture debt, bootstrapping, convertible notes and grants;<\/li>\n\n\n\n<li>utilising share classes;<\/li>\n\n\n\n<li>carefully crafting shareholder agreements;<\/li>\n\n\n\n<li>maintaining a majority stake; and<\/li>\n\n\n\n<li>being selective with your board composition.<\/li>\n<\/ul>\n\n\n\n<p>If you need assistance deciding how to raise funds for your New Zealand startup, you can contact our experienced <a href=\"https:\/\/legalvision.co.nz\/startup-lawyers-lp\">startup lawyers<\/a> to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or visit our <a href=\"https:\/\/legalvision.co.nz\/membership\/\">membership page<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Raising capital is essential for the growth and development of any company. However, you may be concerned that raising capital will result in losing control over your company. Fortunately, there are ways to raise capital while also retaining ownership of your company. This article will explore some strategies you can use to raise capital and<a href=\"https:\/\/legalvision.co.nz\/startups\/raise-capital-retain-control\/\">Continue reading <span class=\"sr-only\">&#8220;9 Ways to Raise Capital and Retain Control of Your Company&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13267,"featured_media":215444,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"208869,207329,211009,207540,213942,220691","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[10],"tags":[56,175,915,962],"class_list":["post-224838","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-startups","tag-venture-capital","tag-capital-raising","tag-bootstrapping","tag-convertible-notes"],"acf":[],"yoast_head":"<!-- This site is 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