What percentage of a business do you typically have to give to an investor funding a business idea?
September 1st, 2008 | by admin |ShadowASL asked:
I’m going to be starting a business and I have a person that is willing to handle all of the development costs etc. Since it is an online business, the start up costs are pretty low for a business, under $10,000 definitely, probably under $5,000.
I’m going to be starting a business and I have a person that is willing to handle all of the development costs etc. Since it is an online business, the start up costs are pretty low for a business, under $10,000 definitely, probably under $5,000.
In this type of situation, what portion of the company is given to the investor?
One Response to “What percentage of a business do you typically have to give to an investor funding a business idea?”
By SDD on Sep 1, 2008 | Reply
In a TYPICAL venture deal (yours is not, of course, since it’s so small), it would be pretty common to give seed round investors 20-30% of the equity. Another way to look at it is that private equity investors expect to get 15x-20x their investment if the company is very successful. If your company (assuming success) might have a market cap of $1MM, then 20x on a $5M investment would only be 10%. It’s usually a negotiating process in any case.