You can raise early stage capital without losing control

Whenever you bring on early stage capital, even if you retain a 60% stake in your business, you're still not in control. Investors take on a lot of risk when they pump early stage capital into a startup. In return, they're going to demand a fair amount of control in the business. Afterall, nobody would want to drop $500,000 of early stage capital into a venture and just sit back to wait and see what happens!

Raising capital is a game of negotiation, but some general rules apply. As with any deal, there are terms and conditions that you need to abide by when you enter into a funding agreement. Even if you retain 95% of your company and the investor gets the remaining 5%, that investor still holds an interest. This interest results in a certain amount of power and control over the direction of the company and the decisions that are made. The boundaries that surround this control are often laid out in the terms and conditions that you sign when the investment is initially taken. Many entrepreneurs quickly excited about the thought of landing an investor and hastily sign terms that may not be favorable to them in the long run. The best advice is to take your time and thoroughly consider all implications of the deal that you are about to settle.

Ultimately, the golden rule applies here--he who has the gold, rules! The more equity that an entrepreneur has, the more control that he or she typically has. However, the more capital that an investor puts in, the more control that they will want in return. And don't forget, any amount of capital that the investor puts forth, automatically translates into at least some degree of control over the direction and often the day-to-day operations of your venture. If you must take on capital, be sure to shop around and do your homework on the investor. Otherwise, it could make for a very rocky marriage between the two of you.