Fundraising · Investors

How do you negotiate with an investor?

Yana Podskrebalina QA Test Engineer at Woact Company

March 22nd, 2017

We’re putting together a seed round and one investor we pitched last month put in an offer of $50,000 for 30% of the company. Unfortunately we don’t like the terms of this investor’s offer. We want to give away less equity, but we don’t want to ruffle any feathers because this investor is close with other investors who will likely follow suit once we close her investment. How do we negotiate this offer so we can keep her on board, retain as much equity as possible, and make sure we keep follow-on investors?

Andy Freeman Product Management and ... - Looking for new opportunities

March 22nd, 2017

Do you want to take this other money at roughly the same valuation ($50k for 30% means that the current valuation is $167k)? If you don't, it doesn't matter whether that investor helps make it possible.

The "secret" to negotiation is perceived value. You currently think that your company is worth less than $116 (before the 50k). You won't find out how much more your current investor thinks it is worth until that changes.

Jeevan Singh

March 28th, 2017

Don't be afraid to tell the investor that the deal is bad but you have to logically and succinctly make your point. People invest in people, people that are afraid to ruffle feathers don't build great companies (generally speaking). Ultimately you have to show that you have the grit and grind to execute. If you can do that investors will buy even if the price is high because the math will ultimately work out.

Heather Holst-Knudsen CEO & Founder, HatchPad

March 22nd, 2017

If you give too much equity away now, it will hurt your future fundraising. 30% for $50K sounds incredibly high.

Jonathan Daniels Passionate, honest, skillful and hardworking!

March 28th, 2017

I think you know how much the business is worth, and what it will be worth in years to come. Don't forget the investor is trying to buy low and sell high. So naturally they may offer a lot lower and ask for a lot more.