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Equity, IPOs and Entrepreneurs

Entrepreneurs seeking funding now could be left in the cold when their companies go public.

For any company that is considering filing for an initial public offering, it may seem tempting to sell off some stock to shore up cash reserves, but the success of several recent technology IPOs shows the value in preserving that equity, Steven Davidoff writes for The New York Times.

"Decisions that entrepreneurs make early in terms of financing can affect how much money they will reap later," Davidoff notes. Often startups will seek funding from venture capital firms, but that can lead the entrepreneurs to have very small stakes in their companies by the time they go public.

Ultimately, Davidoff says, they need to learn to "not only have a great idea and successfully manage their business but also to be careful not to sell too much of the business too soon."

Financial Planning points to a survey conducted by The Investment Group for Enhanced Results in the 21st Century (TIGER 21), which indicated that investors who are considered to have a high net worth are typically more conservative when it comes to making investments.

They are also less likely to take unnecessary or "unwarranted risks in a very volatile environment" Michael Sonnenfeldt, TIGER 21's founder and chairman, told the news outlet.