Early Stage Funding · Founder equity

Would I be able to sale 80% share of my product?

Anonymous

June 4th, 2020

I have created a unique software that will revolutionise the world , funny enough that's what most entrepreneurs say. On a serious note though, I have created a software, it took me over 5 years to finish the final product.


Now I'm broke, and I'm in need of cash. I have set up website, cool 16 slide pitch deck and also a working product. The software targets an $18 Billion market.

Using the software, you can easily setup up to 5 different business model which can bring lots of revenue. You know like $1M to more than $100M revenue annually depending on the business model you stick to.


Now, I want to sell my product to a software company in similar field in which they can use it to enhance their software or set it up as another business model.

So, I want to sell 80% stake of the product, and hold onto 20% stake. I put my value of the 80% at $100M.


NOTE:I don't have a company, I just have business models, a working product and 16 page pitch deck.


Do you think I would be able to sell it, even though I don't have any customer yet?





Mars Nadela Co-founder of a Tech Startup (mvp stage), Proprietor @Browingz Culture Shack

June 8th, 2020

I think it will be difficult for you to find someone willing to give you $100M with the product you havent tested yet in the market. I would suggest to get a little traction first and raise funds or proceed to your 80/20 plan.

David M

June 7th, 2020

Feel free to reach out but I can tell you do not have a business plan based on the structure of your question. Maybe you don't need a full one if you are just trying to license a product sell it. But your marketing comments illustrate you have not detailed out a proper marketing plan. But like I say happy to be proven wrong and look at your pitch deck.

Richard Schwabe Looking for CTO Roles

June 8th, 2020

In other words, you have no traction, no evidence, no growth, not even proven interest of potential customers? Any surveys? Anything?


Reality is you have nothing apart from a "product", which might not even be market ready (certified, externally tested, vetted, etc)


No one is going to give you a single cent for your non-existing company. Especially not 80m$.


If it is such a good product it should not be hard to sell. Everyone can sell a Ferrari right? Well...Reality is a bit different though....


Maybe start going to some distributors or agencies and get some touch to see how they respond, if they were giving that to their clients. (Think IT warehouses for software distribution and licensing/support etc - Obviously no idea what you are doing, but there might be something like that in your industry/market)


I am not trying to be disrespectful, just putting some hard words out there that you probably face from someone you approach when selling it and that you have to defend!


So be prepared! Use the time.


Traction! Evidence (Customers/At least signed contracts with future payments)! Growth! You should start there....


I wish you best of luck and hope you will find your way.

Anonymous

June 6th, 2020

@Ayo Adesokan Thanks for your suggestion, I would have love to be the one leading the company, taking care of my baby. But I have other law project that I want to embark on, which I would be more than glad to be the one spearheading it, which will also bring in more $$$. So, i feel it would be much better to cash out of this one and use the money to fund the next project.


@Sam Mirza It's definitely a game changer for particular market, that's why I decided to sell only 80% shares of the product. So that when it grows, I would still be able to get some $$$ from the 20% share. Not saying that I want to copy Elon Musk, but do you know he only owns 20% of Tesla? Maybe he didn't sell 80% immediately, maybe he did it gradually. I don't want to wait that long to yield for something that I have ben working on for past 5 years. I'm broke it's just another way of saying I have worked on it for 5 years without pay, I didn't have a job then, just support from family. So me cashing out will be an evidence that the work I have been doing for 5yrs have finally paid off, which I would be able help the family and also myself for my next project.

I feel a big relief when you finally say that I won't have a problem finding a buyer. Thanks that, I also believe finding a buyer isn't much of a problem.


@Mr Kelly Johnson Yes, you got it right. I don't believe I'm the one to take it to that great success. I haven't considered selling 100% for royalty. But the caveat with selling for royalty is the fact that I won't get $100 if they decided to use it in-house. Because it's a software, a company might decide to use the software only in their company and not resell it. Maybe I can have like 3 different value proposition;

1. Sell 80% shares

2. Sell 100% for royalty if it's not going to be use in-house

3. Sell 100% cash up front if company wants to use it in-house

I don't believe that it's worthless though, because I have a working product. You can't say free energy is worthless if it can be demonstrated that you can get it free energy. Even without a customer if the product works, you'll definitely find a buyer. Someone created an app and called it "I'm Rich" post it for $999 on apple store, I think about 8 people bought it. The app does absolutely nothing, once you open it, it will display "I'm rich". So you see, no matter what you produce you'll get a buyer, nothing is worthless.


Dane Madsen Organizational and Operational Strategy Consultant

Last updated on June 10th, 2020

Many of us "have seen this movie before", living in it with founders and inventors, a "movie" where absolute perception of value is based on little factual support. Arbitrary value based on time (or self-invested capital) spent is fantasy. Unless you have broad market acceptance (no customers equals no acceptance) and proof of the "game changing" claim (or worse - "revolutionise the world"), you will not get past the first sentence. While $18 B market TAM (without being able to validate it) is is a small global market and any tool is unlikely to "revolutionizing" anything. $18 B is not likely in the top 100 industries in terms of revenue. You will not find a buyer, likely at any price, for an untested software with no business to support it.


Given your statement you are broke, you need to find a partner who understands the business you are in, incentivize them to put in their own time and capital to prove the model and generate traction (all valuations are a function of team, technology, and traction) and validate the market interest in your creation.


We all love a good story, but tempering founders with facts and the hard work of getting into a market is where value is really created.

Ayo Adesokan Co-Founder @ BreezeLearn

June 4th, 2020

Taking your words for it without knowing what software or what industry, you shouldnt be selling that stake. Instead you should raise funds and launch, let your buyers invest or acquire your company , and that way you can still enjoy being the creator and see your product rake in $$$.

Sami Mirza Cofounder & CEO Techquaint | Inquisitive | Passionate | Determined

June 5th, 2020

I agree with what Ayo Adesokan said. It isn't wise to let go of something that you REALLY believe would be a game-changer, and may disrupt the market. Either way, you seriously think it can potentially make billions and yet you wanna sell almost all of it for so less.


And I really don't understand that broke narrative in contrast to what you're looking for. I'm a founder myself and I have struggled to start a business (It's doing well now). And I've been broke. Even $50k-100k would've helped me float.

I don't know where you belong from, but be it anywhere in the world, there must be many situations between 0 and $100 million where you could end being broke, and still own your company.


Bottom line- Don't sell it this way! If you still want to, you won't have much of a problem finding a buyer. I'm certain.

Mr. Kelly Johnson Looking for Co-founder

June 5th, 2020

If it's a matter of you not believing you are the one to take it to that great success, that is a valid reason to want to sell. Some people just aren't cut out for driving the big ideas forward. If that is the case, have you considered a structure where you sell 100% of it for a royalty instead of shares?

I may be wrong, but the type of person that could take it to that big stage, probably doesn't want to split shares, and probably has little use for you being part owner. But you also must understand that your company in this situation is worthless as far as cash up front. That's why I say Royalty instead.

Just another perspective to consider/

Jag Virk Founder and CEO journeyx

June 10th, 2020

Based on what you're saying, it's unlikely that you'll get what you're after. If your product is indeed that good, then why not try selling it first?

Sell it. Proove that others feel the same way. You're attached to your product and that can be dangerous for a founder. Instead you need to demonstrate that OTHERS want YOUR product.


Software is not that hard to develop. If it took you 5 years, then it might take someone with money 5 months to have the same thing developed. Especially if you're talking that sum of money! In fact it'll be a bargain to re-build the software in house.


So in a nutshell - although you do have the product, you're still only essentially selling the idea.


Having said that, start pitching it, find potential buyers/investors and try your luck. If you can demonstrate your vision, then you might at least get some sort of partnership out of it.


Having also said that, partnerships may be the best approach. Find a sales/marketing or other software vendor, and try to form a partnership. They sell, you provide the software, and at an 80% commission rate, that's an offer that's very tempting for an partner. Lot of caveats and disclaimers around this, so make sure you research this option too.