Get Funding Without Giving up Your Company
Do investors want an enormous piece of the pie? Find out how to negotiate them down.
Q: Investors want a huge percentage of my company. How do I reduce that stake in my equity?
A: Many business owners have recently inquired about how to get a more favorable deal when giving up an ownership stake in their venture to investors who provide the critical funding to make the business a reality. How many times have you contemplated the $100,000 from outside investors who want a 40 percent equity stake in your business? Simple math shows that if $100,000 is 40 percent of the firm's value, then the firm must be worth $250,000. The situation is made worse if no one has a clear rationale for why the firm is worth $250,000. So if the deal negotiations simply pick a random percentage, the business gets valued due to that percentage and the dollars invested. But that does not define the underlying reasons for the company value, and that is a major problem for entrepreneurs to avoid.
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