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129 votes

How does it work when somebody invests in my business?

Almost nobody would just give you a pile of money with no expectation of return. In most cases you exchange equity in the company for the investment. A simple example might be that I estimate your ...
Hart CO's user avatar
  • 70.5k
60 votes

Greedy shareholder that does not want to dilute his portion

What can be done? Buy that person out or find a different method of financing the company. You're not going to get very far calling that person greedy and framing the entire issue around that. ...
quid's user avatar
  • 49k
44 votes
Accepted

Why is this tutor agency startup so highly valued by investors?

There is an interesting phenomenon in the world of eCommerce that the existence of an established online marketplace for a specific family of goods or services makes it very difficult to find clients ...
Philipp's user avatar
  • 24k
36 votes

Greedy shareholder that does not want to dilute his portion

A no dilution privilege is precisely that, a privilege and not a duty. There is no reason to believe the shareholder is being greedy, after all, they are adding risk to their own position at the same ...
Dave Harris's user avatar
  • 4,277
28 votes
Accepted

How to compute worth of my equity?

It seems like I hold only $1 because 100,000*$0.00001 = $1. No - you have the right to buy stock at $0.00001 per share. Presumably, the stock will be worth more than that, so your "profit" will be ...
D Stanley's user avatar
  • 137k
17 votes

How to structure equity buyout?

The bottom line is that whatever you two agree on is fair. Having said that, if the company is worth 1 million your equity is 45K, 3 million 135K. Offering you $4,500 is ridiculous and you may want ...
Pete B.'s user avatar
  • 76.7k
16 votes

Greedy shareholder that does not want to dilute his portion

There are various ways that a company can raise capital without diluting shareholder stakes. Have the company issue bonds. These are loans that the company will pay back with interest. Usually bond ...
Robert Longson's user avatar
14 votes
Accepted

Why is it ever a good idea to found a company?

There are a few common errors you are making in your statement. Before I try to address what I see as problems with your line of thinking, take my overall response to the headline of your question as ...
Grade 'Eh' Bacon's user avatar
14 votes

Are banks willing to lend money to one-man APP startups?

Two options: Personal loan. In this case the bank doesn't care what you're using the money for. You just ask for money and promise to repay and do with the money whatever you want. Usually these ...
littleadv's user avatar
  • 177k
13 votes

How does it work when somebody invests in my business?

Typically, if you create a business that wants investors, you will issue stock in the company. One unit of stock is called a share. You decide how many shares there will be and how much each share is ...
Mohair's user avatar
  • 1,020
13 votes

How to structure equity buyout?

It isn't possible to give advice on your specific situation without actually knowing the value of your current equity. Get a lawyer to represent you and give specific advice, including possibly hiring ...
Grade 'Eh' Bacon's user avatar
11 votes
Accepted

Is it possible to make money off of a private company?

Yes, but only if they're looking for investors. You would need to contact them directly. Unless you're looking to invest a significant sum, they may not be interested in speaking with you. (Think at ...
BobbyScon's user avatar
  • 14k
11 votes

If my company is going to be acquired for $50m, how can I avoid high taxes?

When you're talking about this amount if money, you really shouldn't be asking volunteers on the Internet for advice. You can't afford not to hire professionals.
keshlam's user avatar
  • 48.2k
10 votes

How to structure equity buyout?

There's a very simple solution to this. You own 4.5% of a company whose valuation is difficult to determine. Were it simple to determine, it would be obvious that you would be entitled to 4.5% of that ...
David Schwartz's user avatar
9 votes
Accepted

Is having a 'startup fund' a good idea?

Saving money for the future is a good thing. Whether spending those savings on a business venture makes sense, will depend on a few factors, including: (1) How much money you need that business to ...
Grade 'Eh' Bacon's user avatar
9 votes

How to compute worth of my equity?

Cliff period is defined as that period until you vest any options. So if your employment is ended at 2 months 29 days, then you would have zero vested options. Waiting one more day gives you 8.33% ...
Pete B.'s user avatar
  • 76.7k
9 votes

Why do startups dilute their equity?

Because the goal is for the company to get the investor's money not for the owner to get the investor's money. If the founder has 100 shares and sells 50 of them to the investor for $1 million, the ...
Justin Cave's user avatar
  • 27.3k
8 votes

What does "burned through $300 million" mean?

Burn rate describes the rate at which a new company spends its capital to finance overhead before generating positive cash flow (negative cash flow). So burned through means they accomplished it and ...
Bob Baerker's user avatar
  • 76.7k
8 votes

How to convince the investors without actually revealing the idea in the first place?

If an established company could replicate your solution and put you out of business in a matter of weeks, you unfortunately don't have a particularly viable business. Or at least not one that venture ...
Justin Cave's user avatar
  • 27.3k
7 votes

How did Theranos have any value at all?

Something to add, as some have already briefly mentioned, Theranos was able to perform blood tests with some of their stated features (though not reliably enough). The biggest issue was their ...
jed's user avatar
  • 600
7 votes

Why is this tutor agency startup so highly valued by investors?

In business, cutting out the middleman is always more profitable for the upstream seller, provided they can secure the same deal flow. A good ‘wholesaler’ earns their money by providing value to both ...
Lawrence's user avatar
  • 9,362
6 votes

30% share in business

Keep in mind a good lawyer will have the contract cover the five D's: Divorce - what happens if one partner must share ownership with an ex-spouse. Drugs - what happens if a partner breaks the law. ...
Pete B.'s user avatar
  • 76.7k
6 votes

How did Theranos have any value at all?

What I took away from reading Bad Blood was that if the technology ended up working, the value potential was HUGE. For the most part, investors and joint ventures who got burned were suffering from ...
user18561's user avatar
6 votes

I want 100% of my currently failing startup. How should I approach this?

I don't think it's valuable to attribute some sort of motive to your business partner or this quasi blame on that person's parents. It seems to me that you thought you'd effectively get a free full ...
quid's user avatar
  • 49k
6 votes
Accepted

If I raised X dollars of venture capital for my startup business, is that X dollar my personal money now?

It depends on how you structure the transaction. If you want to have personal assets, you can sell some of the stock you personally hold in the business to an outside investor. If you want the ...
Justin Cave's user avatar
  • 27.3k
5 votes
Accepted

Why is there a significant disparity between 409A valuation and fair market value?

There a few factors at play here. First, let me address the difference between the 409A valuation and the recent round of financing. Venture capital investors typically invest in preferred shares of a ...
will_k's user avatar
  • 66
5 votes
Accepted

Can a non-profit company make profit?

Yes. A thriving non-profit is likely to have an increasing "reserve" account. These reserves are the equivalent of a for-profit firm's "retained earnings" account. Depending on the tax and ...
Jasper's user avatar
  • 3,497
5 votes
Accepted

What are the most common partner equity distribution for startups?

If you watch episodes of shark tank, you might gain some insight into the uniqueness of deals that are dependent upon a myriad of other factors. Having to choose, the three will typically split the ...
Pete B.'s user avatar
  • 76.7k
5 votes

What's the deal with startup CEOs making shedloads of money while his company records yearly losses?

In theory, sure, you could start a company, convince a bunch of investors to put in a large amount of cash, and use those invested funds to pay the CEO a large salary while the company loses money. ...
Justin Cave's user avatar
  • 27.3k
5 votes

Why is this tutor agency startup so highly valued by investors?

One aspect you may not be considering: how valuable is a $1.7bn company? Probably not nearly as valuable as you might think. This valuation certainly does not necessarily mean that somebody is willing ...
niemiro's user avatar
  • 461

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