We worked on a large international logistics project for a client (we retained a large portion of the IP and IT). We were bleeding cash and were shopping around for investors when we heard rumours that our client is interested only for a 51% stake of the company based on our symbiotic relationship thus far.
Need advice on
a) how to negotiate the best value if we take on this proposal
b) since we're in startup mode with no transaction to project our value; how do we value ourselves best to sell our 51% stake for a higher price?
c) should we take on low percentage equity investment first before embarking on diluting a large portion of our share?
d) In essence, will this move shoo away future investors? Should we lock in non-dilutable shares of the initial cofounders in the shareholder agreement subject to larger investment rounds?
Much appreciate all your advice.
C-of course if you can find it and if they are offering the same with what they bring to your company. Keeping 49% could be worth far more than keeping 90% depending on the investor. As for non dilutable...are you comfortable with having your future shares be diluted? If not then get the clause. As for future investors, always good to keep the future in mind. Can your survive and thrive now without the investment? If you can don't take on the investor. If you need the investor, take the investor. Investors generally prefer fewere "cooks in the kitchen" like any other major player.
Hi, this is a very interesting question and not too bad of a situation to be in. One thing to keep in mind is that investors are first and foremost interested in you when you can prove why this concept is profitable, why it has potential.
If you have more shares than your client right now, the first question is: Why does the client deserve 51%? Especially if you were the one that developed it and it was already agreed that you'd get these shares. Meaning that you're in the driving seat and can decide for yourself how you proceed further.
Second option; if you don't want to concern yourself with gaining traction with this project to prove its profitability and the client can help to gain traction, then it might be best to give the client this percentage, because they would be one of the biggest reasons for investors actually offering a term sheet.
One thing to keep in mind is to always look at your options, if you'd need more insight check this out http://createappshere.com/app-business-model/ and take it from there.