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Wednesday, June 2, 2010

can I ask my CEO to fund my side business?

A reader writes:

I work in an online marketing company. It is a small startup company and it feels like a family. The partners, CEO, and managers are great. I came up with a business idea that will be in a market that is totally different than the company. I want to pursue this on the side and it won't interfere with my work at the company.

Would it be a bad idea if I pitch it to the CEO to try to get some funding for my side business? I just don't want people to think that I don't like working there or am thinking about leaving. It seems like a risky move but the CEO is so well connected that it is tempting to pitch it to him. 

First let me say that, as always, my advice here is based just on the facts you've given me. You may know things about your relationships and office culture that should direct you differently. That said, I think it's a bad idea, for a couple of reasons:

1. You'll be putting your CEO in a really awkward position. This isn't asking someone to buy your kid's cookies for a school fundraiser; it's asking for substantial sums of money. I would be very uncomfortable with an employee asking me that. And I think it's highly unlikely that he'd say yes, since doing so would impact his primary relationship with you (making him your investor, not just your boss), and possibly even pose a conflict of interest. He needs to be able to manage you as your boss, not as someone with a financial stake in an unrelated side project of yours.

Of course he can just say no, but then you're going to be the guy who had the poor judgment to think this was a good idea.

2. The start-ups I've known have required so much focus and commitment from their employees that it's hard for me to think you could start your own side business without cutting into what's expected, or without at least raising that concern. They're going to assume that at a minimum, your focus will be split.

They're going to think this anyway, even without you hitting up the CEO -- but by pitching him for funding, you'll confirm that you are indeed going to be bringing it in the office.

I'm curious what others think though. Anyone ever done this successfully or think it's a good idea?


Anonymous said...

By funding I'm assuming a partnership, which would allow them control of your employment, future and business. Best case scenario - you'll be working 2 full time jobs. Worst, you could be working 24/7/365 under a dictatorship.

Real world - when you ask someone to fund a business you're asking them to take a financial risk that will alter the dynamic of your relationship regardless if they say yes, review your plan, coach you, pull out or say no.

Going into business with anyone is risky but going into business with your boss is either brilliant or crazy. I'm not picking a camp because I don't know your boss.

Me? I equate it walking across a minefield because in their mind, you're still the employee. And now you'd be an employee that owes them money. I wouldn't do it & I like my boss...

ImpassionedPlatypi said...

I think that if the side business really, definitely is something that isn't going to interfere with his full time job, and if he has a really good relationship with the CEO, it maybe couldn't hurt to at least ask the CEO if he knows anyone that might be interested in investing. The question writer here specifically mentioned wanting to pitch to the CEO because the CEO is "well connected". I can see how the CEO investing would could have the potential to make the working relationships a little awkward, but if the CEO just sets up meetings with the people he's "well connected" to, then it might be ok.

Anonymous said...

never presume that there is a really good relationship. assume that it is a working relationship. every office i have been in had some machiavellian tinge to it that reared its ugly head at the most inopportune times, and some question you have may be the trigger, a question to a ceo about a start-up would be such trigger as every interaction can be interpreted and manipulated in so many different ways, it is best to be cautious. if you can, network and seek outside mentorship that will not associate with any influential figures, both directly and indirectly, at your current job.

Anonymous said...

Money is a very good way to ruin any relationship. It will be awkward if the CEO answers no to your request for funding. It will be awkward, if not hostile, if something goes awry if he gives your company money. And let's not forget any of the fine print that will need to be ironed out if he does say yes.

I'd find other means to fund your side business.

Anonymous said...

Working on a startup myself, I would definitely recommend waiting until you don't work for this company anymore.

Investors invest in you and your company because of the potential for BIG returns. Angel investors (what your CEO would be if he gave you money) are always looking for at minimum 10X returns. That sort of thing is going to require full-time commitment from you eventually. He would be putting himself and the company in a bad position by essentially paying you to leave the company.

Instead, you should get some investment money from elsewhere, leave your current position (without putting them in a tight spot -- i.e. find and train your successor). After you've left, feel free to ask for investment and connections.

I know, you probably feel like your CEO is the one who could get your company off the ground w/ some cash, but there are other people who can help, and it will benefit you greatly to find out who they are and meet them.

Charles said...

"It is a small startup company and it feels like a family."

The letter writer has answered his own question in the first paragraph. Never lend/borrow money with "family."

P.S. The facts that the company culture makes one feel like "family" or that the higher-ups are "great" are NOT relevant; therefore, they should not even be used in the equation as to whether one should seek funding from the boss or his contacts.

Danny said...

I'd recommend taking it slow - talk to the CEO, tell him that you're thinking about a business idea, and you want to get his feedback. That way you get the benefit of his experience and expertise, without having to straight up make a pitch. If he likes it enough to be willing to invest, there's a decent chance that he'll bring it up eventually.

Marsha said...

Business is not family. No matter what it looks like, no matter what it may feel like - they're not the same.

No, approaching your current CEO for funding is inappropriate unless you've got an idea that's an extension or line of business that should be part of the company.