I found an investor, who is ready to invest seed capital ( about $ 100,000 )into the company. But she wants to invest it, in the form of a Loan ( payable back with an interest rate slightly better than market rate, within 1 year), and she wants a total of 20% of share in the company as well. ( 10% for agreeing to invest the money in this startup, and 10% for some consultation that she can provide in the beginning and throughout the course of the company.) By having this 20%, she wants to be a Member of the Board of the company, without any active help in the company. ( She is a lawyer, and so she can assist with creating contracts and agreements. She can also help with the local language, in which I am still not very fluent. She also has good experience with the local tax system, and may be able to guide the company in these regards. )
All the idea is mine, and I have invested 1 year in developing it, and creating all the Business plan, Market Research, etc. The seed capital would be used to develop the software and services necessary for the operations of the company, and which form the core part of the company.
Do you think this amount is too much? I am not in a position to invest much into the company, and I really need an investor. (My personal investment would be not more than $ 5000 ) What is a good estimate for her contribution?
Update / response to the answers provided :
The company will be a Limited Liability company. The Loan was to be made to the company. And, yes, I confident enough ( even if I think very pessimistically) that the company will pay back the money, in less than a year term. But to start the company, I need to invest in IT ( computer software, hardware, and Telecom), hire employees, and other startup expenses. I am able to invest only $5000 from my pocket. Thus, an investor is very crucial. I tried renegotiating with her, and she made me a request for 20% share for $70,000 in Equity. ( No loans anymore).
But here, the IT person, who will design and create all the IT infrastructure required ( including websites, and computer algorithms), which is necessary for the entire project to function, now requires some shares in the company, for his work. He doesn't want money, but is more interested in shares in the company. I estimate his work to be worth $30,000.
Now, if the investor values the company at $ 350,000 ( $70,000 @ 20%), then the IT person would be receiving about 8.5 % approx, for his contributions. This leaves me with an ownership of 71.5 %.