Hot answers tagged investors
19
In my opinion, these figure seem very very investor-friendly.
Basically, you're valuing your business at only 100K. It's hard to tell if that valuation is in line with your business but a 100K valuation is pretty low. If ordinary shares in the UK are the equivalent of common stock in the US, then that point is good for you. But I'm pretty sure you'll also ...
15
At a basic level, with that shareholding configuration, they can band together and out vote you 60% to 40%. This is a concern but relationships and getting everyone onboard with direction before discovering it is the wrong choice should cover this.
You need to match this against "where would I be without it".
I would be trying for 40% to them, holding ...
13
The short answer is NO!
Asking your investors to sign an NDA is impractical as most of them see dozens if not hundreds of ideas each years so they will never be able to manage their exposure if they have to sign an NDA for each idea they hear.
At the same time, asking an investor to sign an NDA is telling the investor that you are probably very concerned ...
11
I'd like to offer you a different perspective.
So, yes. 51% percent of the company means he's got the controlling vote. But is it such a bad thing? If he's very experienced and well known in the startup arena - it's a good thing. His leadership can take you places you've never dreamed of and open doors otherwise closed to you and your fellow students. He ...
7
First, lying isn't the best policy. If investor(s) discover the truth, your credibility is shot, and investors do exchange notes (check with each other). Your reputation will either be an asset or liability.
Having other businesses isn't a bad thing if the other businesses are staffed with the right people and growing — in short, your role is either as ...
6
It's the chariot technique.
One horse has a lot of flexibility. It's not that hard to turn, you can vary the pace if you get tired, you can stop to graze if you're low on resources (consulting, day job, etc.).
If you hitch two horses together, you give up a lot of flexibility, but you gain focus. They have to keep up with the team, and with the pace set by ...
5
I heard a good analogy once talking about kids and nannies and how that relates to software products. Outsourcing your software development is like hiring a nanny to raise your children. Sure they will "care", but ultimately they are just kind of doing what you want them to do and babysitting your child, making sure they aren't getting in to trouble and ...
4
Great question.
A good rule of thumb for any business is to buy stuff ONLY if:
The purchase is a component part of your product or service offering (i.e. you need cars to offer car rental service; you need servers to offer hosting services)
The purchase adds a long term value to the company
For example, Mc Donalds buys most of it's locations because ...
4
The developer has no problem assigning the code, however, he won't assign it unless we give him the rights to re-use some of what he calls "generic" code.
You need to clarify what "generic" and "reuse" means.
It would seem that the core issue here isn't that the developer has discovered a novel, groundbreaking approach that will generate millions and ...
3
It's better not to say that; it can come across as a lack of enthusiasm for their program or an arrogance-tinged expectation that they should be competing for you (and these programs almost always have more qualified applicants than they can admit).
Anyone applying for any incubator should research and consider several. It's fine to ask questions about how ...
3
Here's Paul Graham's (founder of YCombinator) take on the matter:
http://paulgraham.com/control.html
Keep in mind he's talking about a much larger A round -- not an angel round.
In another essay:
A typical big angel round might be $600k on a convertible note with a valuation cap of $4 million premoney. Meaning that when the note converts into stock (in a ...
3
Since you need his skills and his money and he wants a significant chunk of your equity, he'd make a much better partner than investor.
Treat entering a partnership with at least as much care and thoughtfulness as entering a marriage. If you can't work out a partnership, I'd pass on an investor at those percentages.
3
$50k for 40% might sound high, but, you're a first time, single (part time) founder, with (apparently) no product, or customers. The risk is almost entirely in the part of the investor.
I'd say you're pretty lucy to be getting an offer - but accepting at 40% will make further rounds difficult. Perhaps you could talk to the investor about giving back some of ...
3
Opinions vary. Here are a few:
http://gust.com/angel-investing/startup-blogs/2012/04/10/5-traits-investors-look-for-in-entrepreneurs/
http://www.bothsidesofthetable.com/2010/10/06/the-four-main-things-that-investors-look-for-in-a-startup/
http://blog.startupprofessionals.com/2011/06/investors-look-for-these-six.html
...
3
Your question suggests that there is some confusion between "investment" vs "loan" and "sales commission / brokerage fees".
Either he's going to invest in your company - an amount of money in exchange for a percentage of equity. This is a long term move and the investor shouldn't expect quick wins.
or he's going to loan you the money, against a set of ...
3
I would doubt that an angel investment would upset your majority status - esp. since you are a sole founder (and you haven't disclosed any other shareholder owners) .
Sounds like you are looking for an advisor, and not a board member.
You can add an advisor to your board, but your bylaws / articles of incorporation must define what their voting rights ...
3
@Taylor Look into convertible debt or note. What the easy explanation is. That an Angel is given a percentage of equity if and when you raise a round beyond a seed round. This could be a series A or greater. The note would then convert to X number of common stock giving them X percentage. Thats the high level view. It gets a lot more complicated but to get ...
3
How much customer development have you done?
IMHO, validation of initial assumptions on product / market / demand / price elasticity is more important today if we're talking about digital goods / services without inventory carry costs. Proven customer metrics and clear understanding of the funnel + sales cycle times trumps a list of CxO titles.
Sure, ...
3
Global nomad has a great answer. In addition, investors will want assurance that your other business will not be a source of competition or divert important resources away from your primary venture.
It is reasonable for the investor to require a non-competition/solicitation provision as part of their agreement.
All things being equal, investors may ...
3
Why are you making a business plan? What do you need those numbers for? Are you doing it because you "should" be doing that? If so, could be a big waste of time.
It also sounds to me like you are going to include a bunch of numbers that don't have much accuracy, and then presumably you are going to make decisions based on those numbers. That doesn't ...
3
Noone will invest in you without completely understanding what you are doing. You can't wait til they give you money until you share your secret.
Also, a reputable VC has startups come through all the time. They aren't in the business of stealing their ideas, they want to invest and for you to make it happen.
Also, a freebie bit of advice. Make sure you ...
3
If there's nothing signed, you're on very squishy ground and you should consult with an attorney asap.
If there's an NDA in place, that doesn't evaporate if you don't include him.. unless the agreement says otherwise. If it says he can't talk about the project elsewhere, then he can't. You just have to be willing to back it up because a contract without ...
3
Before this point, he was your good partner and now he wants something which puts your business at risk (at least you see it in that way). I work with programmers, they tend to reuse their code whenever possible. You don't need to be a programmer to know how copy/paste feels good. Also this is the only guarantee he has for his effort (he is not paid for that ...
3
As a programmer, we have generic code all the time - its usually the technical glue that holds a program together and allows it to work without actually being a program in itself. Think of a website - the web server is 'generic code', and nothing to do with the website code. The dev might want to take his equivalent of a webserver, or parts thereof, away ...
3
So, is it highly improbable that an investor would throw their money
into a product/company produced by a person with student loan debt?
No
Is it even a factor, usually?
Probably not.
Why would an investor invest in a product that's being controlled by a
person who is in debt?
Because, unless the debt is from an addiction or problematic ...
2
Think from the perspective of the person you're contacting. You're receiving a 4-page executive summary, from an unknown person, who is essentially asking for money. And of course, if you're known to be an angel investor, you probably get dozens of such emails per week. What do you think an angel investor in this situation would likely do: I think your ...
2
Drop the deal. Silicon valley VC told us, entrepreneurs, in a meeting: never give up more than 7-10% of the business (standart discount for investing funds - please notice the difference between funds and individual investors-, though, is 20%). Investors should be interested in giving as much money as needed for the business to succeed, because giving you ...
2
If the 5th seat goes to one side or the other then you're basically agreeing up front who wins the vote if there's a tie. That's true whether the 5th seat actually goes in some way to one of the other 4 people (someone gets more than 1.0 votes) or whether it goes to a good friend of one of the 4 people already on the board. You might try to get both sides ...
2
It means that the Company authorized the sale of $18.5M in securities (not clear what securities), and has so far sold $9.78M.
As part of the offering, the Company sold warrants to buy its stock. A warrant is like an option -- it gives you the right to buy the stock at a set exercise price at a later time. In this case, if you add up the total exercise ...
2
From everything I have seen, yes, professional investor will not touch your company with that kind of condition, since your motivations are not aligned with that of investors'. Really good book worth 1000X the price of it is The Founder's Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup.
Especially read the section on Rich vs King. ...
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