Equity

Another problem faced by startups is a question of ownership of the project. I do not want here to consider particular legislation, but will focus on common things.

When a businessman says he's ready to give 5, 10, 30, 50, 75, 90% of the investor, then, as experience shows, in most cases the question ... And you have to tell me that the division of shares in the share capital of the company has two objectives:.

- To influence decisions.

- Share the profits from the sale of the project.

Sometimes these things are confused, sometimes employers do not realize that from this it follows. And all this because of misunderstanding of the logic of the investor.

People are just shocked, as owning 5% of the shares of the company can make all strategic decisions. Or as a total for the owner of a minority stake in the company after the sale money could be more than the majority. (If necessary, I will give examples).

As an investor wants to:.

- Find a good startup entrepreneur, able to build and sell a large business.

- To give him some money and get a minority stake in the company ( not to take management decisions ).

- To retain the privilege (the right of veto, and others. ).

- To protect their risks.

The tool does not allow the property to solve all these problems and solves them an investment agreement. The features of such a treaty is that it provides all the ... And the worse the situation is, the more power to the investor.

I know several cases where an entrepreneur who lost control of the company simply exposed.

On the other hand, if everything is progressing as planned, investors shall ensure that the entrepreneur does not share in the company fell below a certain level. A significant proportion implies a good income on the sale of the company, which is an important motivating factor for the entrepreneur and the key to getting investors remained. We're talking about the right investors.

in total. That we have. If we are properly developed and the company calculated the required amount of investment, in the early rounds, we will give 25-40% of the investor. At the lower it is unlikely to agree to it more and not have to. Here we have an agreement to invest in a thick finger at a minimum, which allows the investor to protect their investment if the entrepreneur can not cope. The share of the investor gives the investor to understand how he plans to make this project.

But, it is standard practice, which can vary within certain limits.

I thought it was well-known things, but 60-70% of the startups have no idea about this. That is why I write.