TheBaker
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- Jun 28, 2014
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So I've thought a lot about this, had the fortune to chat with vigilante about it too, and I've decided I'm going to move forward with an investor's offer to partner.
My thought is to offer $100k for 10% with a 5-year option to buy him out/he can force me to buy him out.
I know I'll give him excellent return on investment, and I am pretty sure he gets that which is why he approached me.
Curious what other people's advice/experience is?
Becareful.
If you take the investment and he or she comes on as a silent partner. Have your lawyer set up a vesting schedule.
Second clearly define who owns what.
If you really want investors. Look for value added angel investors. Not venture capitalists yet.
The job of your value added investors will be not only be to invest in you but make connections to build and strengthen your business.
Try to own more than 51% of your business.
What you'll be raising essentially is known as a seed round ranges anywhere from $500k - $1M.
So theirs 2 types of fundraising from angel investors.
Convertible Debt and Preferred Equity. In the early stage I recommend convertible debt.
Here's a quick article about convertible debt http://www.entrepreneur.com/article/159520
Preferred equity is straight forward.
If your offering $100k for 10% that means your company is worth $1M
100,000/0.10 = $1M
To figure out if your company is worth $1M depends on what industry your in.
With tech I know its 2.5-4x your annual revenue.
How do I know this stuff?
My tech startup is incubator backed so they pretty much engrave this stuff in your brain.
Hope I helped.