What should you do when someone asks for a stake in your startup?
Category: Business Advice
Tags: stake, startup, startup investor
You might get plenty of help from someone who wants to support your startup. However, that person might want a stake in your particular startup. With this in mind, you have to think carefully about what you are going to do with regards to that person asking to get into your investment.
Discuss That Person’s Responsibility
You have to let someone who wants to invest in your startup that you might require a bit of extra help over time. You have to talk about what that person has to pay to you to get in the front door. You must also discuss responsibilities like what business functions one might be responsible for and if that person is to spend more money in some form. Make sure whoever wants to get into your startup is given some kind of duty that will make the investment worthwhile.
Consider the Amount You Want To Give
You should take a look at the total amount of money that might come into your business over time and what it will cost to run that business. Take a look at the profit margin that you will get and see what would be left over based on what you are giving to someone. You might use a part of whatever is left in your profits as the stake that you are willing to give to someone.
How Many Other Investments Does One Have?
You should ask your investor to see what other investments he or she is working with at a given time. Do not bother with people who might have investments in things that might relate to a conflict of interest to you. You need to ensure that whoever wants to invest in your work is fully committed to what you offer and is ready to support you all the way through.
What Does the Investor Demand?
A person who wants a stake in your business might demand things like a part of the revenue for one’s investment. Stock options might also be included if they ever come about. You should only be willing to give whatever you feel comfortable with giving to your possible investor. This is to keep the investment from being more of a problem than it has to be.
Be careful as you are getting someone to come into your business as an investor. Check on every investor who wants to get into your startup to see what one wants to get out of it. Don’t forget to look into what you can afford to give to your possible investors.
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