43

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 without going through that marketplace. The reason is that consumers consult that online marketplace first and immediately find what they are looking for. They ...


17

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 to second guess your friendship. If investment was still a ways off, offering you 50% of what is owned is reasonable. However that is not the situation. You ...


13

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 an accounting firm to look at the numbers and give a sense of valuation. If paying a couple grand to a lawyer and a couple grand to an accountant isn't worth ...


10

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 valuation. Fortunately, the value is about to be determined. They're negotiating a funding round. That will require arms length negotiations between the ...


7

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 ends. Consider supermarkets. As a consumer, you might be able to buy your rice from a rice farmer, provided you are willing to find one who you can communicate ...


5

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. As a practical matter, however, it is pretty unlikely. If you're running a business that requires investors to put in money, it is very unlikely that those ...


5

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 to buy the company at that price. Instead it often follows from a bunch of misleading accounting: a whole multitude of funding rounds and price guarantees ...


4

What you should consider with a compensation package that includes shares is "what happens if the shares end up being worth nothing?" This is true for startups and major companies traded on the public market. Equity in a private company (not publicly traded) is worthless unless that company goes public or gets sold. Should either of those scenarios ...


3

As I wrote in my answer to your last question: It might be true that at the moment you don't have much of a reason to use such a service. You have other client acquisition channels which provide you with all the work you need and the other services provided by that platform do not justify their commission for you either. But this might change in the future ...


3

This seems to be a really simple calculation. Your friend is about to get an investment. Presumably the investors are giving some sum ($X) for a percentage of the company (Y%). That values the company at X/Y. So if the investors offer $1M for 50% that values the company at $2M. Your shares are worth 4.5% of that. That's all there is to it. If they are trying ...


3

The other answers don't understand the concept of raising capital. First the principle investors will ask you to clear your books minus the current leadership team. You are part of clearing the books because investors want as high of a return as possible and your 4.5% is in the way. In reality your 4.5% is NOTHING - N O T H I N G. Some companies are ...


3

First, are you certain that you are selling the startup itself as opposed to selling the assets of the startup? Often for smaller startups, the assets are sold rather than the startup. In this case you still own the startup, but the startup doesn't have much left. This makes a big difference: Sales of assets (e.g., IP or software) are often taxed as ...


3

You can make any amount your salary, but that won't magically cause money to appear out of nowhere. So yes, you would need investors if you can't pay your salary from revenue.


2

Perhaps this might be what you're after. For the USA, from Wikipedia: Investment clubs are generally formed as general partnerships, but could also be formed as limited liability companies, limited liability partnerships, corporations, or sole proprietorship that transfer real estate assets to a group living trust (similar to a family trust). While an ...


2

This is a somewhat US-centric answer. Investment company Private equity Blank check company Special-purpose acquisition company (SPAC) The above differ by the how/what/why of their investment. If you are looking for a generic term, I think holding company could work.


2

Question 1: Can it be said that company is now valued at $10,000? This question cannot be answered without knowing what percentage of the company the new investor is getting for his $10,000. If the new investor gets 100% of the company for $10,000, then it can be said that the company is valued at $10,000. On the other hand, if the investor gets 1% of the ...


2

Ever tried to buy something in a shady night market? The first offer is always ridiculous. The beginner asks for 25% discount - and has already lost, as he should have asked for 85%. That's happening to you right now. Even if you asked them to double up on their offer, you'd be losing. Calculate what you think is the fair amount, and request 200% of it. Both ...


2

Employee stock options usually have a strike price equal to the fair market value of the company on the grant date; the idea being that you are getting a share of the value created from that point forward. So I would evaluate the options based on the potential of the company relative to what it is now. In my experience it's pretty common to not get a strike ...


2

an effective pre-money valuation of $18 million This seems to be referring to the founders' and current employees' point of view. Before the deal: Founders own 90% and the old option pool owns 10% of the company. These existing shareholders and option-holders would represent a pre-money value of $20 million, if they could complete the deal without a new ...


2

If you were looking to be a tutor as a full time job, the security of not having to lose money because of a cancellation and not having to regularly find dozens of students to fill your weekly work schedule might work in this agency's favor. This is especially true in places where the going rate for tutoring is low. I suppose you can likely work for this ...


2

It would of course be ideal to do as thorough a financial due diligence as you would and could if you were making a substantial cash investment (angel investor, VC, etc.) However, for understandable reasons, the founder(s) may not be keen to show you all the financial (and strategic) information they would show a VC or angel syndicate. If the overall tone ...


2

Congratulations on your idea and I hope you can turn it into some market value. Your tone suggests it is very innovative. If it was me, I would do two things: Read The Lean Startup Start In this book you will learn strategies on the quickest way to bring your product to market. Additionally you may want to read The Myths of Innovation in this book you ...


1

No mystery here, you just say "minimal". Your costs are not zero and it would be very naive / newb to use the term "zero". If you have not yet filled in taxes for a year where you had a business like this, you'll soon realize that you do in fact have costs for devices, internet, electricity, use of a room in the house as an office etc. ...


1

If you are able to keep yourself booked on your own, and each of your clients is recurring and likely long-term, then you would probably not benefit much from using the agency. However, it's likely that not all tutors have the know-how and wherewithal to find their own students, or perhaps not all tutoring relationships are recurring or long term. Many ...


1

You'll find many people on this forum who will argue that stock options should be valued at zero, but I think this is an overly simplistic and conservative approach. Most employers that offer stock options will also give one more valuation scenarios that they use to "sell" you on the stock options to you. Obviously this will be more on the ...


1

Without a strike price the options are meaningless. You have the option to buy shares... at what price? Even if you don't know how much a "share" is worth without a strike the options are meaningless. Certainly knowing what percentage of the outstanding shares your options represent would be valuable, too - at least then you could get some sort of ...


1

There are something like 10-30 million programmers † In contrast there are a handful of "founders who made it" to the point of making a billion, and there's only a small number - a few thousand? - who made (say) 10s of millions. Further, note that programmers are insanely well-paid. Unless you're a complete idiot, any programmer can build say $1m ...


1

Equityzen has reasonable deals but it only works well for companies with clear IPO plan. Few known limitations (please verify with your sales person) - There is NO real ownership of stocks, basically we own percentage in Equityzen-series LLC and that LLC owns stocks. This makes difficult to sell pre-IPO stocks outside equityzen. They have express deals to ...


Only top voted, non community-wiki answers of a minimum length are eligible