Thread: business investors or business partner

what do you think is better if someone wants to invest in your business,have them as an investor or make them partner in the business.

Originally Posted by mmmoney

what do you think is better if someone wants to invest in your business,have them as an investor or make them partner in the business.

The only reason to bring on board a partner is in order to cover an area of weakness. Otherwise partners are of no real use (if they can't cover you're weaknesses then they are more a pain in the ass).

Originally Posted by fanocks2003

The only reason to bring on board a partner is in order to cover an area of weakness. Otherwise partners are of no real use (if they can't cover you're weaknesses then they are more a pain in the ass).

I've used partners is one other scenario that has proven to work for me...and that is to spread risk. Especially if you are just starting out in business ownership and looking at either creating startups or acquiring businesses that you know are high risk/high reward I would recommend considering a partner to spread some of the risk. Partnership is still 'risky' in itself so you had better be pretty dilligent in evaluating whether or not the proposed partner is a good fit, but if selected correctly I think the right partner (and partnership structure) can be beneficial in a high risk/high reward opportunity that perhaps otherwise would not be able to be pursued.

I know this is very similar to what fanocks2003 said (and I agree with him) because in reality this partner would be effectively covering an area of your weakness -that being your financial weakness - but I wanted to put some detail around a scenario that I have had success with. Partnerships are definately tricky, but if the choice is partnership or nothing and the deal is too good to pass on and still makes sense with a partner, be dilligent in selecting a partner, proceed a bit slower, define clear expectations, and make sure you have your legal bases covered.

how much does a investor gets back in return and after how long if some one decides to invest in my project.

and how much would a partner get back?

Originally Posted by mmmoney

how much does a investor gets back in return and after how long if some one decides to invest in my project.

and how much would a partner get back?

That depends entirely on the situation, perceived risk, perceived payout, etc. How much are they putting in? How much is the valuation?

As an investor, they typically want some sort of protections (usually in the form of preferred stock, as opposed to common stock) which gives them additional security, such as liquidation preference, etc.

As a partner, would they be putting any money in? Is their expertise in this market? Do they add value?

Originally Posted by mmmoney

sorry guys,I am a total noob to the fastlane.could you please explain in detail

I am working on a small project and the only reason I want to include someone is because I need their help financially.

this person does not have any special skill I can use,but might help me decide on stuff if I am stuck and also might help do few tasks

what is my best option,should I have a partner or investor.

I expect this project to return almost double of the total investment,how would profit sharing differ if I have a partner and if I have an investor.(I want to maximize the profit I can keep)

An investor may not always mean they will do anything, but put money in and hope you will pull it of.

In your case I would advise finding a partner. If you need money as well, then find a partner with money.

Money is not always (or very rarely) the best medicine though. Knowledge is. That is why I have a slightly sceptical view on the idea of investing your house and car in a startup. Because many times it is just stupid. I guess you have heard about the two expressions "dumb money" and "smart money"? You need the later.

Dumb money is something you bring on board later to increase the company value.

Originally Posted by Operation_OPM

If you just want money from this person. Then you need to prepare your plan and presentation.

This person is ready to invest in my project(I don't have to sell the idea to get investment),but also wants to be part of the project

note:it is not a big project so the investment also is quiet small.

on second thoughts more than keeping the bigger share of the profits I am interested in keeping control of the project as it is my idea and want to see it through as I have envisioned it.

If I plan to get this person onboard as an investor what legal formalities are involved?