Hot answers tagged investment
19
Your investors would frown on such a practice. They gave you money for X reason and you used it for Y reason. It doesn't matter what Y reason is or how noble the cause, it's still Y reason. Your investors reactions might range from nothing to outright anger to a lawsuit. Best case scenario, 1 in 1000 approves. Less best case scenario, they believe they own a ...
13
Finder's fees can vary all over the lot, but the fee is ALWAYS paid by the company. Fees will vary depending on who the finder is (a professional intermediary, like an investment banker, vs. just an ordinary schmoe making an introduction), how much work he/she does beyond simply introduction (from helping to craft a summary selling document to soliciting ...
8
Do not give up ownership of your company for a few measly thousand!
Respectfully decline the investments, but do not burn bridges. You may need the funds later.
If you need money in the future, try to obtain it as a loan (amortized, lump sum, balloon, etc.), not as a trade for equity. The only way you should ever give up equity to another entity is if that ...
8
Commonly you'll want to release more than 10%, but less than 25%. And also as little as possible. If you let go of more, you runt at risk of becoming a hard choice when (if) you're going for a Series A round. If your investors have too little invested they're likely to just not engage as much, and their lack of interest may be noted by the Series A investor.
...
8
What is an angel investor?
An angel investor is almost always a wealthy individual investing his or her own money in new startups (as opposed to managing a large fund of money on behalf of an institution).
Almost all angel investors made their money by selling their own startup successfully.
Angel investors almost always invest smaller amounts. These days ...
8
No absolutely not! Don't do it. Your investors have invested in you and your business. The money is not yours, it belongs to your business and that is what it should be used for. If they wanted to invest in someone else, they would have done it directly.
When your business is running well and you are able to take some money out, go for it - with your own ...
7
Taking money from family is very risky business.
Are you ready to deal with disgruntle relatives for the rest of your life if the business never picks up and you spent the money? If you can bootstrap it -- do it, until you have some idea whether it is going to fly or not. If the family insists and you can't say NO, try to explain to the worst case of ...
6
This has been posted several times. I have written several articles on the subject, which I provided in answer to the other similar questions, and are copied below:
A Novel Idea
From Idea to Capitalization
Conception to Creation of a Business Idea
You also might want to read the Web Startup Success Guide by Bob Walsh (link is to a review I wrote a while ...
5
There are plans for doing business, and then there are "business plans".
For example from Y combinator:
Q: Do we need to write a business plan?
A: Not for us. We make funding decisions based on our application
form and personal interviews. We love
demos, but we never read business
plans.
Most investors are investing in you first, idea ...
5
Send them a monthly letter, including:
Your own summary, in plain English, of major things that the business has done. New products, features, hires, etc.
One or two (at most two) problems that you're working on, that you need their advice and help with
A P&L report for the previous month, comparing it to prior months
A current balance sheet
An ...
5
Cash that you put into your corporation can be assigned to either a Capital Stock account or a Loans Payable (from the corporation's perspective) account. The choice of which one is pretty much up to you.
If you go with Loans Payable, the corporation can pay you back at some point.
If you go with Capital Stock, you will receive additional shares in ...
5
Work on a prototype. Or at least a very self explanatory powerpoint.
Network as much as you can. Local investors, VCs, or even startup gatherings. Network with potential customers. A potential customer could become an investor if they really see a value in the idea.
Create business plan. Research and have it ready, you never know when you will run into a VC ...
5
A funding Series is kinda subjective. Usually, you raise a Series A when you have hit your seed money milestones, raised a significant amount of money or your investor wants to evaluate your company (e.g. set a round price).
I would say start thinking about what your Series A will look like now and start the process of raising it. You can never start ...
5
Vested: you own the shares out right, if you quit then they won't be returned to the company.
I've been in your shoes, I feel your pain. I think you are being sold out.
It is time to play hardball. The director(s) are not just selling the company, but also selling you. They've even codified it in the due diligence documentation. It sounds like some of ...
5
$150K is outrageous. Are you on the East Coast? Here in California, numbers like that are unheard of.
And did you also have to pay the investor's legal fees? If so were those more than $50K?
The idea that 5-10% of the investment amount went to legal fees is appalling.
Disclaimer: This information does not constitute legal advice and does not establish an ...
5
Anti Dilution basically protects an investor against a situation where a future round will be raised in lower price per share (lower valuation) compared to the price he received.
Basically you are guaranteeing the investor a price match if any future investor will get a better price than he did.
Technically, this is done by increasing the conversion rate ...
4
The main reason is the notion of preferred stock. Corporations have it, LLC's and S-Corps don't. VC's want preferred stock so they can:
Control the board by having the preferred stock control more of the company
Setup conditions that allow for favorable conversions for certain events and multiples. This has to do with getting their money out ahead of ...
4
As I understand it, in the United States, anyone trying to raise investment money in return for a finder's fee, or other compensation based on delivering investment funding, must be a registered broker. Otherwise it is illegal for him to receive performance-based commissions, and he could be forced to return any commissions received. Furthermore, a company ...
4
Since the investor is giving you money, the question of "who pays" is moot. You mean with money before the investment or after? Cause you know, it doesn't matter! :-)
My question is: What is the "finder" doing for you? Just setting up appointments? Cause you can hire an admin service to do that. Build your slides and pitch your company? That's ...
4
Angels are the ones who are investing their own money. Naturally, they wouldn't take a call as soon as you'd expect them to. They are driven by their personal tastes and choices. Also, they would take longer time to get convinced about your position if you are not within their areas of expertise. In such a case you may have to go an extra mile to convince ...
4
Do some background research on the person you met - does he have a history of funding people like you and ideas like yours? Is he involved in any outstanding litigation (or worse, does he have a criminal record)? Lexis-Nexis is your friend here (find someone at a law school to help you do a little research). Wouldn't hurt to ask him via e-mail either about ...
4
Several years ago I was approached by someone also in his 70s who wanted to partner on a business venture. He had a business website, claimed he had Fortune 500 clients, and that he had XYZ business degrees and professorships. He said he knew Larry Ellison personally. Although I verified some of his professional credentials, others were exaggerated (guest ...
4
A lot of good answers above about being caution, and they're all correct. However, I'm surprised I don't see anyone telling you to call his hand.
So, he's talking about the big-shots he knows – ask to see them, and then research them. He's talking about the software development house – meet with them. Ask for their references, do research on them.
Been in ...
4
No Game.
Check out how YCombinator, TechStars, AngelList etc. work. They take < 10% of your company for tens of thousands of dollars.
Quote from YCombinator FAQ:
How much do you invest?
Usually $11,000 + $3000 per founder.
So $17,000 for two founders, $20,000
for three or more. Occasionally we
invest more. The goal is usually to
give ...
4
A common way to do this would be to have the angel investors loan money to the company, with an option of converting that loan to shares if there is a follow-on larger investment. This allows the angels to invest without having to agree on a valuation until you have a lot more traction.
For example, the angel/seed investor might put in $100,000. When the ...
4
Without any knowledge of the country where you are operating, your background and connections, I'm sorry to say your question seems to be naive.
Anyway, there's no way you can convince people "to invest in the company without sharing all the detailed plan of the university project". Investors invest in a plan, you can't ask money without explaining what you ...
4
That's a typical situation that you can avoid easily following some best practices. I suggest you to read Venture Hacks and AVC's MBA Mondays that have covered this topic in detail.
In brief:
Shares must never be assigned upfront. Every founder will vest his share over 3 or 4 years.
Reserve a share pool for consultants, advisors, future partners. You ...
4
You could all invest in a simple note (loan) or consider investing in a note that converts into equity in the next round of equity that the company raises. Typically, these notes pay a reasonable rate of interest and convert at a 20% discount to the price of the next round. Presumably you are all investing in the company because you believe in its future ...
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