Puneet Mehta, an Atlanta entrepreneur, remembers how eager he was to take the money. When investors courted him, he felt “razzle-dazzled,” enchanted by their promises to help him build the online marketing business he had founded in 2006.

“Our goal was to expand rapidly with private equity, put in a bunch of sales teams, get some distribution networks going,” Mr. Mehta explained. He ended up with $1.5 million in private equity growth investments and venture capital. “But I realized after we had raised the money that there were so many clauses that came with it that I had lost complete control of the company,” he said.

Mr. Mehta quickly grew upset with his new bosses, who, he said, handed control to “finance guys who had no idea what marketing was,” moved operations into exorbitantly expensive office space, installed a board above him and hired a new president and chief financial officer with hefty salaries. “Every day was torture to go in there, being an employee at the company I started,” he said.

One morning, he arrived at the office to learn that a beloved colleague had been fired. And so Mr. Mehta quit. The company’s revenue dropped to zero, he said; today, it exists only on paper.

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