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Should a Startup Hand Over Control to an Investor?

I am launching a small business in my town and it is only going to take $1,000 to get started. A friend wants to invest the $1,000 in the business but says he wants a 55 percent ownership stake of the company. Is that fair? What are the pros and cons?
Tim Berry answered April 25, 2011
URL: http://www.entrepreneur.com/answer/222298
It sounds as though you're being asked to sell a controlling interest in your business for $1,000. Is that all you're worth? That sounds like a no-brainer. I wouldn't give away a 55 percent interest in a used car for $1,000, much less a business.

Here's the question: Is this friend someone you want as a partner -- forever? Is he going to do half of the work? Is he so smart or so hard working or so capable that you're happy to take only 45 percent of the business just for having him also involved in it? If that's the case, it's not about the money so much as the two of you starting a business together. If you want to be equal partners, then be equal partners.

But don't do it for $1,000. There are a lot of better ways to find $1,000 than giving away half ownership in a company. If he's not going to do half of the work, borrow the money from somewhere else. There's no way you'd even consider giving ownership in a business for $1,000. Absolutely not.

Related: How to Find the Right Investor for Your Business
Related: Don't Give Away Ownership Easily
Tim Berry is the president of Palo Alto Software Inc., based in Eugene, Ore., which produces business planning software. He is also the author of 3 Weeks to Startup and The Plan-As-You-Go Business Plan, published by Entrepreneur Press.