Thinking about rapid expansion? You know you can't do it without the resources of a particular type of "partner," namely an investor that provides the necessary funding. But are investors "partners"? Or do they merely provide the means for enabling you, as an entrepreneur, to do what you cannot do on your own?

These intriguing questions came to the forefront for me in the late 1990s, when I needed to decide whether to continue expanding my Italian restaurant chain, Pasta Pomodoro, steadily on my own, as I had been doing, using cash from the business and loans to open one or two restaurants a year.

My other option was to turn to the resources of an investment partner to allow me to pursue my ambition of playing in a larger entrepreneurial league -- and also my passion to bring fresh, healthy, and inexpensive contemporary Italian cuisine to a larger clientele in the San Francisco area, and beyond.

PEOPLE, NOT THE FUNDS.  The decision I made to pursue the rapid-expansion route has been grounded in a philosophy that other entrepreneurs would do well to take to heart: when choosing a financial partner -- and indeed, investors can and should be "partners"-- ask yourself, who are these people?

In other words, choose the people rather than the largest amount of capital. And then, when you do, make sure the deal you put together fits the needs of your company and your goals for its future.

In our case, we turned first in the late 1990s to a Bay Area venture group, Dorset Capital, which invested $8 million in two rounds. The latter round also included a second investor, Stone Canyon Venture Partners. Then, in 2002, we won a commitment from Wendy's International (WEN ), which invested a substantial $12 million for a 25% stake.

Dealing with financial partners has been a business-defining experience for us. No longer do I need to personally guarantee each loan, as I had to do for those first 12 restaurants I opened without outside investors. Indeed, our financial partners have enabled our chain to expand to 37 restaurants, as of the spring, 2004, with 12 more openings planned for the remainder of the year.

FROM THE GUT.  In thinking about why our financial pairings have worked, what I keep coming back to is just that they felt right. They were working from the gut. In the case of Wendy's, in particular, which would be taking an especially large stake, I knew from the beginning that this was a partner with whom I could do business.

Our partnership arose after a former Pasta Pomodoro employee alerted me that Wendy's was always on the lookout for innovative food concepts, allowing the fast-food giant to expand beyond its flagship hamburger concept. That employee put us in touch with the right person at Wendy's, who visited our restaurants -- and fell in love with our concept. I then headed to Wendy's corporate headquarters in Columbus, Ohio, to meet with the CEO and key executives with whom our company would be dealing.

From those meetings, I knew that I could work with these people. Not only were they knowledgeable about the food-delivery business and could thus broaden our expertise, but they had deep pockets in terms of resources -- regulatory, operational, human resources, as well as financial. Also, I had a strong feeling that they were people I could trust. Good people, honest people.

TAKE A SEAT.  The partnership was structured to be one where Wendy's would step in only if we asked for help. Indeed, a major criterion for an ideal relationship is that the financial partner either leaves you alone to run your business -- or intervenes against the backdrop of greater knowledge.

On the other hand, I had to get used to not having complete control, which I actually consider an advantage. Ever since I left the small village near Milan where I grew up to train with world-class chefs, (including Paul Bocuse in France), serve as an executive chef at the Hyde Park Hotel in London, and then at Donatello restaurant in San Francisco, and eventually start my own company, I have been in the driver's seat, making all of my own decisions.

Now I would be subject to a degree of oversight from my investment partners, which allowed me to grow as a person and as a leader. On the Pasta Pomodoro board, Wendy's currently holds two of the seven seats, as does Dorset, with two accruing to us, and the remaining seat assigned to an independent party. What this means is that when the budget is due and we're challenged by rising costs, such as labor and insurance, it's now my job to explain and present a convincing plan of action to the board.

LASTING PARTNERSHIPS.  My strategy is, first, to consider my financial partners as just that. They are partners who enable me to sharpen my thinking and from whom I can learn. The right attitude is essential for working with a financial partner. Then, I work hard to consider the questions they will have and to demonstrate that I have already put together a strategy for addressing those concerns.

And so it goes: Investors are partners, and if you as the entrepreneur consider them so, you will go a long way toward formulating partnerships that endure. Remember, financial partners take some of the risk away from you -- but only if you choose the right people and create the right deal.

Adriano Paganini, 37, founder of Pasta Pomodoro, a contemporary Italian restaurant chain, grew up in a small village near Milan, where he was inspired by his mother's cooking and insistence on the freshest ingredients. He studied culinary arts with world-class chefs, such as Paul Bocuse in France, and served as executive chef in the main dining room of London's Hyde Park Hotel before coming to the U.S. in 1991 to assume that role at Donatello restaurant in San Francisco. Two years later, he fulfilled a lifelong dream, opening his own restaurant, Café Adriano, to critical acclaim, including a glowing review in Gourmet magazine. In 1994, determined to share his passion for Italian food the way Italians enjoy it -- simple, healthy, fresh, and inexpensive -- with a wider clientele, he founded Pasta Pomodoro. With 37 restaurants and 12 planned for the remainder of 2004, the San Francisco-based chain had revenue of $41 million in 2003. In 2002, fast-food giant Wendy's International, Inc. invested $12 million for a 25 percent stake in the company.

Entrepreneur's Byline comes to BusinessWeek Online readers courtesy of EntreWorld.org, a resource for entrepreneurs that is sponsored by the nonprofit Ewing Marion Kauffman Foundation.


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