They do have a handful of potential clients that are evaluating the product.could use guidance on this question. I am considering investing $50,000. What should I be asking for in terms of ownership? Thank you!!
If your missions align, the numbers will work themselves out. If your mission is just to make money I can't help you. If you are interested in humanity and happiness then it becomes very easy to settle on a term sheet.
Hard question to answer with limited information. Let's say that their pre money is 950000- Then 50k is basically 5% of the post money (50k pluls 950k) Additionally if you take a startup role, the equity and/or options can vary from 2.5% to 20% depending on the role and time you spend.
If you are part of an angel group, it might be worthwhile to work through them.
It will all boil down to startup valuation, size of market opportunity and standard industry game play, MVP is in place, your input is thus incubation/acceleration aid which will culminate into a better Demo day for gig at hand.Thus your take should range from 3% - 15%. Will you provide, Mentorship, Human Capital or Governance to the Startup or are you just a passive investor? Nonetheless 3 - 15 is your game plan set.
Hi Bob, always remember money in the pocket is worth more than blindly invested. Take time to identify a scalable company, conduct a business case and let the statistics define how much stake you are willing to acquire on the minimum for a given amount
Bob, you have established your comfort zone as far as size of investment. Next you have to decide what you want the result of that investment to be for you. You are making an assumption that an ownership stake is typical, but it may not be, depending on your goals. Valuing your investment comes from consider numerous factors.
First is typically the amount you expect to earn back on the amount you invest. Are you looking to generate a steady rate of return for a long period, or are you hoping to extract a multiple in a short period? Do you want to have decision-making authority within the company in which you invest? Do you consider your money a loan or are you putting it all at-risk? How steep is the risk? How are similar companies performing? How much time do you have to contribute to the success of the company you are considering investing in? What is the total amount of capital the company is trying to raise? How are you positioned against other investor candidates? Do you all want the same thing? What does the business plan say about the future of this company and is it credible? How hard would it be on you if you lost the $50K entirely? Is this the first time you've invested in a company? Is the company in an industry in which you have personal experience?
There are a lot of questions you haven't attacked in your short note to guide the kind of relationship you should seek with a company you're considering investing in.
If you're not aware, CoFoundersLab has another side called 1000 Angels. You may want to check out their education section for investors at http://masterclass.1000angels.com/