I am establishing a new e-learning website in the middle east and I need some funding for establishing the company and paying monthly costs for marketing and software used in the site and other stuff. I have in mind some potential partners, but I need to know in advance how much to offer, since they are close friends or relatives, and I need to know the percentage in both cases if the partner is just an investor with no managerial roles in the company or he can share his expertise and connections.
Thank you in advance.
not sure I understand your meaning of partnership for a funding partner
- some one that is working for the company and has a role (CXO or VP) then 50% even if s/he is not bringing money to the company.
- some one who brings money and may be can offer advice and connections then it depends on the valuation of your company and you should treat the transaction the same way as if it was a stranger.
Try to go after smart money, people that have some experience, contacts or other important things to add to the business besides money.
If the person is only adding money to the business you will need to try to make the share below 10% and not more than 20%, or in the future the business won't be interesting to you anymore, a bad thing for all the shareholders.
This question has various answers, and some are complex. Also, what you think you want and whats good for the company are two different things.
Agree with Kyle. I'm sorry to say it is not possible to give any kind of definitive answer to your questions because there are so many moving parts. A good starting point is to have a reasonable and realistic pre-money valuation for your business in mind before asking for investment. Then you'll be better prepared to decide what percentage you will give up for X amount of cash. If the partner is only bringing cash to the table I would suggest they get a lower percentage than the one bringing cash and extras. Only you can decide what those extras are worth and therefore how much to give up in each case. There are no hard and fast rules about what percentage to give up in different scenarios ... it comes down to negotiation and an assessment of the value added by the new partner. Both must feel comfortable with the final settlement in order for it to work healthily.