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Wise Words for Startups: No Money, More Problems

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This story appears in the November 2014 issue of Entrepreneur. Subscribe »

When people ask me for a single piece of business advice, I always say the same thing: Never, ever run out of money. And that goes for everyone involved: the startup and its investors.

When there isn't enough money around, things get … let's just say—weird. On the startup side, weird comes in the form of a "cram down." Say the company's product is flailing in the market or, worse, can't get to market. The existing investors are loath to pour more money into it, and when they do, they demand more than their fair share of equity in exchange for the needed cash. The best a company can hope for is a transparent deal that motivates it to achieve specific goals and then rewards it with more favorable terms if successful.

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