Should You Take Funding to Grow Your Business? Here’s Why This Entrepreneur Turned Down a $7 Million Offer

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Discover why Sarah Dusek rejected a $7M offer, how she grew her business to $100M and key tips for entrepreneurs considering funding. | SUCCESS

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As an entrepreneur, you want to grow your business. You understand that when your marketing plan consistently reaches consumers, you’re building a team that shares your company’s vision. By leveraging systems and automation, your business can accomplish its goals.

You’re interested in accelerating your growth initiatives, and many have considered the idea of funding. TV shows, such as Shark Tank or Dragon’s Den, make the opportunity to receive funding appealing.

Less than 1% of startups will receive venture capital funding, and the odds of making it to Shark Tank aren’t high. That’s why Sarah Dusek’s business advisors were surprised when she turned down a $7 million funding offer despite her business being on the brink of financial collapse.

Dusek knew it was not the right deal and was determined to find another way to save her and her husband’s business. After years of struggling and rebuilding, Dusek’s instincts were rewarded with the business’ growth, and by the time she left her leadership position at Under Canvas, it was worth over $100 million.

Here is Sarah Dusek’s success story, the pros and cons of whether or not to take funding, and Dusek’s tips for what conditions and terms you should consider.

Sometimes your first idea isn’t the one

Sarah Dusek didn’t start in entrepreneurship. After college, she spent eight years working for nonprofits doing community work in Africa and the Far East.

“At the end of that time, I was burned out and frustrated about the lack of social change and the lack of solving any big systemic issues,” says Dusek. “And I had an aha! moment that said, ‘Maybe NGOs, maybe the vehicle I’m in is not the right vehicle for doing the kind of work that I wanted.’”

Dusek realized businesses that solve problems are ideal for sustainable growth and cash generation. In 2006, she launched her first social-minded property development company business.

Friends and family funded Dusek’s first business—there was no institutional funding. The company failed due to the 2008 financial crisis. Dusek and her husband reeled from the failure but determined it would not end their story.

After the failed business in the United Kingdom, Dusek and her husband decided to move to Montana, where he is from.

“We picked up and moved to the prairie of Montana, where his family are farmers and ranchers…. We were trying to find a way to figure out [how to] earn a living off the land, but not farming,” says Dusek. “My early days in Africa inspired this idea of recreating the African safari experience in the stunning vistas of Montana. So, it’s like, could you take really extraordinarily beautiful tents and create accessibility to Montana’s wilderness? So, that was the origination of the idea.”

Solving their problem, they developed this idea into a company they called Under Canvas, which they officially started in 2012. They started building large-scale, tented camps outside national parks and recreating a safari experience, allowing guests to visit a national park.

“[We] saw that there was a demand for room nights outside of national parks, and there was a demand for more accommodation, and you know, very limited options for hotels. We realized we could build a bigger business than we could fund ourselves and that there was an opportunity to grow and capture the market because we were kind of the first players in the glamping market and decided if we wanted to grow faster, we were going to need to put more money in the business,” says Dusek.

The couple used the business’ profits to keep growing organically, but realized they could grow faster with funding.

The couple consciously decided to raise capital, which Dusek says was challenging. “Most venture capitalists at the time were focused on tech, and we were not a tech business.”

While purchasing land for a new location, the seller backed out at the last minute, and their business was threatened with financial ruin if she didn’t fix the situation.

After eighteen months of pitching and rejections, Sarah received a $7 million offer that could have saved her company. But the terms were troubling: the investors would triple their investment before Dusek and her team saw any returns, effectively stripping her of control. She was warned she’d be blackballed if she declined the offer.

“The terms of the term sheet were…predatory…. And I spent ages trying to negotiate with these guys,” says Dusek.

Faced with this pressure, Dusek chose to walk away, risking everything to protect her values and retain control of Under Canvas. “We were not aligned on our values…. We don’t see being in business together the same way…. I had to basically call them back and say, ‘Thank you very much, but, no, we are not going to close this deal.’”

Dusek still had to raise capital, so she found a broker who could help and had relationships with investors. Nine months after walking away from the bad deal, they closed a funding round of $17 million. They got the capital they needed and used it to rebuild the business. A year later, they sold the company for $100 million.

Dusek says the way to think about funding is to ask whether capital would expedite the growth of your business and how. “You want to speed up time by using capital strategically. And I think that’s the best way to think about using money. [We often see people] take funding too early before they’ve got a good product market fit,” says Dusek.

She says the most important things to consider are who, what and how: “How are you aligned? Are you trying to achieve the same things? Do you have the same values…? Are you going to build the same things…? If you’re not aligned and you’re not trying to achieve the same objectives, then one party will not be very happy.”

She said you also need to consider:

Martin Matthews, a licensed financial advisor and business consultant, says that when it comes to funding, you should look at what you might be giving up.

“So if you’re taking in money with an equity partner, they’re going to come and take a position in your company with this money. How much of your business are you giving up…? If you are the founder, can you make the final decisions? You need to think about all those kinds of different things before you take on anybody’s money because they’re going to want [a] say, and you have to be able to control how much you’re giving up of [the] company that you’ve built,” says Matthews.

After exiting, Dusek was able to fulfill a dream. “I had already decided that I was going to start a venture capital firm…. I [decided to] invest in other women to help them grow and scale their businesses. So we launched a venture capital fund to invest in female entrepreneurs in Africa after we sold,” says Dusek.

Dusek spends her time on what she’s passionate about. She’s the author of Thinking Bigger: A Pitch-Deck Formula for Women Who Want To Change the World, the managing partner of a venture capital firm called Enygma Ventures and the founder and CEO of a travel and climate company called Few & Far.

Photo courtesy of Sarah Dusek

Kimanzi Constable is a writer, freelance journalist and business owner.

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