ETMarkets.comThe real cost of the wrong capital goes beyond the numbers. It limits the ability to pivot. It slows down decisions.
Over the past decade, I have found myself on both sides of the funding table. As an investment professional, I worked across capital markets, private equity, and structured credit, witnessing over $10 billion in transactions, many of them textbook-successful, and many others that didn’t turn out as expected. These experiences gave me a deep understanding of how capital can either accelerate a vision or quietly unravel it.
However, I didn't feel the significance of capital decisions until I became a founder. When my co-founder and I started our venture, we were very clear on one thing: we did not want to raise capital while sacrificing ownership, control, or time. We did raise money to help fuel the growth of our business, however, we've always been intentional about the type of capital we bring in and the alignment that comes with it. When we originally started our venture, we had the intention of helping other founders raise capital that served them best and met their needs, while still maintaining their control of the direction and mission of their company. That awareness drove the way we built our company, and continues to inform decisions we make as we grow.
Why founders default to equity — and why that’s risky
Indian founders are among the most inventive and resilient in the world. Many early-stage companies turn to equity funding, and for good reason, despite having strong fundamentals. Equity financing provides more than just capital; it can offer valuable expertise, connections, and credibility that are often crucial for a startup's growth. When executed correctly, equity funding is a powerful tool for fuelling growth and scaling your business. It brings in investors who can provide strategic guidance and open doors to networks that might otherwise be out of reach. This partnership can significantly accelerate a startup's development and help founders navigate the challenges that come with growing a business.
Despite its advantages, equity funding comes with trade-offs. Many early-stage founders feel it’s their only option because traditional lenders often don't cater to new-age businesses, the paperwork is cumbersome, and the timelines are too slow. As a result, equity becomes the default choice, even when other funding routes exist.
Culturally, there’s also a glorification of large funding rounds. Headlines about million-dollar raises and unicorn valuations create the impression that securing equity financing is a milestone of success. However, it’s crucial to pause and consider the long-term costs. If we don’t think critically about these decisions, we risk trading short-term success for long-term control.
The hidden cost of equity: More than just dilution
Every founder understands dilution — it’s visible on the cap table. However, the deeper implications of equity are often overlooked. While you may remain CEO, equity funding typically brings board seats, voting rights, and investor priorities that can shift the company’s direction. The pressure to meet investor targets may lead to changes in the company’s roadmap, sometimes pulling it away from the founder’s original vision.
Equity funding can be a long-term partnership where investors share the risk and offer valuable guidance. Their experience can help you scale and avoid costly mistakes. However, the pressure to grow quickly and hit milestones can be overwhelming, leading to premature product launches, over-expansion, or over-hiring — not because it’s the right time for the business, but to meet investor expectations.
It is important to acknowledge the psychological burden of equity. When founders are raising large rounds, they may find their focus shifts from the original mission of a product and becomes instead centered on meeting investor needs. Burnout is common, as the decisions that get made become less about what is best for the product or the customers, and more about satisfying what the investors were interested in. Equity funding can be a powerful growth tool when done in the right context. The key is to align yourself with investors who have the same vision as you and are bringing more to the table than just offering capital, and that enables you to scale to the next step while remaining in control. When done right, equity can support growth, provide security, and be a means to achieve long-term goals.
What happens when founders choose better
Fortunately, the funding landscape is evolving. More founders today are exploring debt financing options such as revenue-based financing, venture debt, and other flexible solutions that allow them to raise growth capital while keeping their equity intact. These options include term loans, venture debt, working capital demand loans, sales invoice discounting, purchase invoice discounting, and bank OD/CC. Such alternatives provide founders with the capital they need to scale without having to dilute ownership.
We’ve seen founders with strong revenue and solid margins choose alternative financing to fund growth initiatives like marketing and inventory. This not only helped them grow efficiently but also gave them more leverage when they later raised equity, if they chose to at all. They were no longer raising capital out of urgency but from a place of strength.
One such example is Airbnb. During the height of the pandemic in 2020, Airbnb raised $1 billion from Silver Lake and Sixth Street Partners, with a large portion structured as debt financing rather than traditional equity. This allowed them to access critical capital without significant dilution, stabilize operations during a turbulent time, and later stage a successful IPO on their own terms. Their journey illustrates how choosing the right type of capital, one that aligns with the company’s unique needs, can lead to sustainable growth, empower founders, and help maintain focus on the original vision.
Matching capital to the stage of the business
There is no one-size-fits-all answer to fundraising. It depends on where you are and what you’re building. Equity makes sense for R&D-heavy businesses or when entering a high-burn phase like international expansion. Strategic investors can be invaluable allies not just for the funds they bring but also for the doors they open.
But if your business has recurring revenue, strong margins, and a clear path to profitability, debt funding capital is often the smarter route. Using equity to solve short-term cash flow issues is like selling the house to pay the rent. It’s expensive and often unnecessary.
Founders should think of capital like any other business input: strategic, measurable, and adaptable. The goal isn’t just to raise money. The goal is to stay in control while building something valuable.
The real price of wrong capital
The real cost of the wrong capital goes beyond the numbers. It limits the ability to pivot. It slows down decisions. It can introduce competing agendas. Slowly, it has also shifted a company’s culture from builder-led to investor-managed.
Capital should enable the vision, not override it. When it’s well-matched, it helps businesses move faster with clarity. When it’s not, it becomes a drag on the very momentum it was meant to fuel.
We’re at a pivotal moment in India’s entrepreneurial journey, where founders are beginning to reclaim power. The ecosystem is richer with options, and there’s a growing awareness that raising the most money doesn’t always mean winning.
To every founder building in 2025, I say this: Let capital work for you, not the other way around. Know your metrics. Know your story. Raise only what you need, and never trade ownership for convenience. The founders who inspire me most aren’t the ones who raised headline rounds but the ones who stayed true to their mission, retained control, and scaled on their own terms.
Growth doesn’t have to cost you your company. You can build boldly and still stay in charge of your vision.
The author is CEO and Co-founder of Recur Club.
However, I didn't feel the significance of capital decisions until I became a founder. When my co-founder and I started our venture, we were very clear on one thing: we did not want to raise capital while sacrificing ownership, control, or time. We did raise money to help fuel the growth of our business, however, we've always been intentional about the type of capital we bring in and the alignment that comes with it. When we originally started our venture, we had the intention of helping other founders raise capital that served them best and met their needs, while still maintaining their control of the direction and mission of their company. That awareness drove the way we built our company, and continues to inform decisions we make as we grow.
Why founders default to equity — and why that’s risky
Indian founders are among the most inventive and resilient in the world. Many early-stage companies turn to equity funding, and for good reason, despite having strong fundamentals. Equity financing provides more than just capital; it can offer valuable expertise, connections, and credibility that are often crucial for a startup's growth. When executed correctly, equity funding is a powerful tool for fuelling growth and scaling your business. It brings in investors who can provide strategic guidance and open doors to networks that might otherwise be out of reach. This partnership can significantly accelerate a startup's development and help founders navigate the challenges that come with growing a business.
Despite its advantages, equity funding comes with trade-offs. Many early-stage founders feel it’s their only option because traditional lenders often don't cater to new-age businesses, the paperwork is cumbersome, and the timelines are too slow. As a result, equity becomes the default choice, even when other funding routes exist.
Culturally, there’s also a glorification of large funding rounds. Headlines about million-dollar raises and unicorn valuations create the impression that securing equity financing is a milestone of success. However, it’s crucial to pause and consider the long-term costs. If we don’t think critically about these decisions, we risk trading short-term success for long-term control.
The hidden cost of equity: More than just dilution
Every founder understands dilution — it’s visible on the cap table. However, the deeper implications of equity are often overlooked. While you may remain CEO, equity funding typically brings board seats, voting rights, and investor priorities that can shift the company’s direction. The pressure to meet investor targets may lead to changes in the company’s roadmap, sometimes pulling it away from the founder’s original vision.
Equity funding can be a long-term partnership where investors share the risk and offer valuable guidance. Their experience can help you scale and avoid costly mistakes. However, the pressure to grow quickly and hit milestones can be overwhelming, leading to premature product launches, over-expansion, or over-hiring — not because it’s the right time for the business, but to meet investor expectations.
It is important to acknowledge the psychological burden of equity. When founders are raising large rounds, they may find their focus shifts from the original mission of a product and becomes instead centered on meeting investor needs. Burnout is common, as the decisions that get made become less about what is best for the product or the customers, and more about satisfying what the investors were interested in. Equity funding can be a powerful growth tool when done in the right context. The key is to align yourself with investors who have the same vision as you and are bringing more to the table than just offering capital, and that enables you to scale to the next step while remaining in control. When done right, equity can support growth, provide security, and be a means to achieve long-term goals.
What happens when founders choose better
Fortunately, the funding landscape is evolving. More founders today are exploring debt financing options such as revenue-based financing, venture debt, and other flexible solutions that allow them to raise growth capital while keeping their equity intact. These options include term loans, venture debt, working capital demand loans, sales invoice discounting, purchase invoice discounting, and bank OD/CC. Such alternatives provide founders with the capital they need to scale without having to dilute ownership.
We’ve seen founders with strong revenue and solid margins choose alternative financing to fund growth initiatives like marketing and inventory. This not only helped them grow efficiently but also gave them more leverage when they later raised equity, if they chose to at all. They were no longer raising capital out of urgency but from a place of strength.
One such example is Airbnb. During the height of the pandemic in 2020, Airbnb raised $1 billion from Silver Lake and Sixth Street Partners, with a large portion structured as debt financing rather than traditional equity. This allowed them to access critical capital without significant dilution, stabilize operations during a turbulent time, and later stage a successful IPO on their own terms. Their journey illustrates how choosing the right type of capital, one that aligns with the company’s unique needs, can lead to sustainable growth, empower founders, and help maintain focus on the original vision.
Matching capital to the stage of the business
There is no one-size-fits-all answer to fundraising. It depends on where you are and what you’re building. Equity makes sense for R&D-heavy businesses or when entering a high-burn phase like international expansion. Strategic investors can be invaluable allies not just for the funds they bring but also for the doors they open.
But if your business has recurring revenue, strong margins, and a clear path to profitability, debt funding capital is often the smarter route. Using equity to solve short-term cash flow issues is like selling the house to pay the rent. It’s expensive and often unnecessary.
Founders should think of capital like any other business input: strategic, measurable, and adaptable. The goal isn’t just to raise money. The goal is to stay in control while building something valuable.
The real price of wrong capital
The real cost of the wrong capital goes beyond the numbers. It limits the ability to pivot. It slows down decisions. It can introduce competing agendas. Slowly, it has also shifted a company’s culture from builder-led to investor-managed.
Capital should enable the vision, not override it. When it’s well-matched, it helps businesses move faster with clarity. When it’s not, it becomes a drag on the very momentum it was meant to fuel.
We’re at a pivotal moment in India’s entrepreneurial journey, where founders are beginning to reclaim power. The ecosystem is richer with options, and there’s a growing awareness that raising the most money doesn’t always mean winning.
To every founder building in 2025, I say this: Let capital work for you, not the other way around. Know your metrics. Know your story. Raise only what you need, and never trade ownership for convenience. The founders who inspire me most aren’t the ones who raised headline rounds but the ones who stayed true to their mission, retained control, and scaled on their own terms.
Growth doesn’t have to cost you your company. You can build boldly and still stay in charge of your vision.
The author is CEO and Co-founder of Recur Club.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
ETPrime Membership
