What % of equity should you give a startup investor?

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4 жыл бұрын

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Пікірлер: 31

@lindokuhlekalolo5377 11 ай бұрын

It did, thank you so much for this🙏💛

@artist.pablo.urizar 5 ай бұрын

Thank you for this info! I have a company that is in its beginning stages and this was a question that I definitely needed more clarity on. Appreciate it.

@Jonathanmillspatrick 5 ай бұрын

Glad the video helped. Good luck!

@aldojansel9439 4 жыл бұрын

Thanks for your vids!

@ziggyc4474 4 жыл бұрын

You welcome

@blorebeast7371 4 ай бұрын

Sir i am gonna start a business and i have a single investor for my whole business. I dont know how mich equity i ahoukd deal with him as the business is a startup. The investor if from family, trusted one. Is there any possibke way to have 1v1 conversation with you?!

@ammaral-garmoshi7249 4 ай бұрын

Thank you for the vid! I have a question, I am starting a business soon and an influencer offered me free ads from him and his influencers friends. How much should I give up for such an offer? He has about 40 influencers and the deal is that they would advertise for free at least once a month. Also he asked for 50% of the business. He won’t do any work but offer this service. What do you think? Thanks!

@Jonathanmillspatrick 4 ай бұрын

I wouldn't give them any equity for simply posting. Create a success-based incentive where they get equity for every X amount of revenue the generate.

@ammaral-garmoshi7249 4 ай бұрын

@@Jonathanmillspatrick Thank you! What percentage would you say is fair if they bring in a X amount of sales? Or a range of percentages. My niece suggested he should get 50% of the sales that comes from the ads he would provide. Would you say it’s fair?

@Jonathanmillspatrick 4 ай бұрын

@@ammaral-garmoshi7249 50% is entirely too high. You do not want a scenario where partners are equal. Because the reality is that no two partners will ever equally contribute resources, capital, skills, etc. I do like the idea of a revenue-sharing, instead of gifting equity. In that case, a revenue-share, I would consider giving the influencer similar rates as affiliate marketing, which is usually 10-30%. Keep in mind you will have other costs and giving away 50% of revenue would likely put you in the negative after you consider COGS, taxes, etc.

@nathanaelkambaine387 5 күн бұрын

Thankyou for this vid. Is a 20(founder)/80(investor) share deal fair? He suggested I start the same business in multiple areas he is providing the capital. The split will be 20/80.

@Jonathanmillspatrick 5 күн бұрын

The only time I've seen that type of split favoring investors is after multiple rounds of funding that created that level of dilution. If this is your first round of funding the average is around 80 (founder)/20 (investor).

@deonrichardson5250 Жыл бұрын

Can you give an example of a startup who is looking to raise 85k? If the standard is 15 - 20% how does it work if it's more than one investor? Example: More than one investor would be fine with putting in 10k each rather than the whole 85k.

@Jonathanmillspatrick Жыл бұрын

Hi, Deon. It's all just math. Multiple investors would collectively take up that 15-20%. Keep in mind that is just a benchmark. It all depends on how much traction you have at each funding round.

@silver10188 Жыл бұрын

If i wanted like $50k for advertising my product, and found an investor. For how long should he keep the 20% equity? Is it forever? What if like four years from now, and the fund is consumed. Is he gonna keep getting 20% for the $50k he invested years ago? What if i needed another $50k from another investor? Am i gonna give another 20% ? This way I’ll end up with nothing.

@JonathanPatrickMills Жыл бұрын

Your initial investor would get 20% of outstanding shares at the time of their investment. Forever. Unless your agreement with them includes a buyback clause. If you need more money you would give up more equity. That amount of equity you give at each round of funding depends on the valuation of the business at that time. Most founders struggle with the idea of giving up large amounts of equity. But, investors are the ones that are risking their hard-earned money.

@harperproduction3935 Жыл бұрын

@@JonathanPatrickMills Dear Sir thank you for this video, been on hunt for info & even watching as closely as possible Shark Tank to see if there is a model I can copy for my figures but in vain. But at least I now understand that the 15-20% for the 1st investor is kinda standard since they take the biggest risk, right. But here is my dilemma, if you don't mind. Our TAM is 30million. Financial revenues projected at $239,400,000 per month. Looking for $10million investment, what kinda of valuation is that? I saw a formula that says assets -liabilities= valuation. Which is fine, but at 15 or 20 % equity for the investor, what kind of CAP should I give???? Or have I watched too much fictional shark tank? 😄

@Jonathanmillspatrick Жыл бұрын

@@harperproduction3935 Thanks for the comment. A few things. If your TAM is only $30M then you could never do $239M per month in revenue. As for valuations, those are tricky. If you are at the idea stage and don’t already have some milestones accomplished then trying to value the company is very difficult. That is why most startups at a similar stage use a convertible note/SAFE.

@psychurch 5 ай бұрын

Having a 20% equity stake from the seed round means the investor owns 20% of the company's shares at that time, not 20% of the income. Their financial return primarily comes from the increase in the value of their equity, which could be realized through dividends (if the company decides to distribute profits instead of reinvesting them), or more commonly, through the sale of their shares, either to other investors in future funding rounds or to the public through an IPO. The allocation of income to shareholders, in the form of dividends, is decided by the company's board of directors and may not directly correlate to the percentage of ownership.

@SadeeqPakee 11 ай бұрын

Is that 15%-20% equity forever?

@Jonathanmillspatrick 11 ай бұрын

Typically. Your first investor is taking a big risk, so the potential reward needs to match that risk. There are instances where you can negotiate a buyback at a set rate of return.

@benclare5324 3 ай бұрын

Hi, great video btw! I wondered if you may be able to advise if this is right? so I recently spoke with an investor for a start up investment, I was asking for £50,000 and they stipulated they wanted 80% equity from the start and they would set "milestones" for us to buy the equity back as we paid off the investment, now I'm new to the business scene and I have no capital of my own, or anything of value to hold against the investment, so I understand this would be a strong gamble for the investor, but my business plan is strong, and I feel 80% is alot to ask for, am I right in thinking this way, or is 80% acceptable due to the circumstances of me having nothing to put against the investment and the fact I have no previous experience in running a business? Any advice on this would be greatly appreciated thanks in advance

@Jonathanmillspatrick 3 ай бұрын

That’s a loan, not an investment. The average founder gives up 15-25% in their seed round.

@benclare5324 3 ай бұрын

Oh i see, so is 80% equity from a loan average then? Or is that still steep? Thank you for getting back to me btw I appreciate it.

@Jonathanmillspatrick 3 ай бұрын

@@benclare5324 I would walk from this investor.

@benclare5324 3 ай бұрын

Yeah I have refused the offer because it just wasn't financially viable, I just wanted to make sure that this wasn't an issue I would encounter too often, I got the feeling they were trying to take advantage of my lack of experience in this field, I'm currently looking into some free online business courses to become better versed in this area, thanks again

@Jonathanmillspatrick 3 ай бұрын

@@benclare5324 its not free, but pretty affordable. jonathanmillspatrick.com/startup-funding-toolkit/