How much to invest and for what share?

Let's say you've decided that the game is worth the candle - how do you know how much money to offer and what share of the startup to ask for? https://kanecountyconnects.com/wp-content/inc/?sergey_tokarev__at_she_is_science__more_than__40_000_was_raised_for_participants__education.html

The value of the share is calculated based on the valuation of the company - in other words, the market value of the business. For example, a startup was valued at $ 1 million. This means that a 10% stake will cost $ 100,000. This will be the amount of investment.

This is a very rough estimate, since risk factors are also taken into account when calculating the amount of investment, but in this article we explain the basics.

This raises a second question: how to evaluate a startup?

At later stages, the estimate is calculated based on the company's revenues, its real costs and growth dynamics. But the problem is that at the pre-seed stage, when angels are attracted, the startup most likely has no sales yet. This means there is no income, and all the figures from the presentation for investors have not yet been confirmed. These are hypotheses that you and your team have yet to test. How, under such conditions, to calculate the value of a future company, and, accordingly, how much money to give for a share in it?

Unfortunately, no way. But in Silicon Valley, the cradle of startups, a universal scheme has emerged over the course of many decades, according to which startups invest at the preseeding stage. As a rule, investors - angels, incubators and accelerators - give such teams $ 10,000- $ 50,000 for 10-20% in the company.

The exact amount can only be determined by yourself, based on the business plan that the startup provided you with. How much money does a team need to launch a product on the market and start making money? How quickly will they pay off? The longer the payback period, the more the share that you can ask for in exchange for the amount the team needs.

How to make a deal?

Congratulations! You have chosen a startup, evaluated it in all respects and are ready to donate money. How to do it?

To begin with, just in case, let's list how not to do it, although it should be obvious:

• give money to founders in cash, even if it is a small amount,

• put on the card,

• transfer to a bitcoin wallet (or any other cryptocurrency),

• give money in any way without preliminary signing of investment documents.

It is important to understand that, like any other field, the startup market is full of scammers. What is the story of the Ukrainian startup Sixa, which managed to lure more than $ 5 million from investors into unfounded promises and disappear!

The first thing you should do after you have decided on an investment object is to consult with a lawyer. It is advisable to choose a specialist specifically for working with venture capital transactions. A lawyer will help you draw up a contract, prescribe the risks and will be able to defend your interests in court if something happens.

What needs to be stipulated in the contract

The contract specifies the rights and obligations of the parties to the transaction. The main obligation of an investor is to provide cash, and a startup - shares of the company in the agreed amount. But there are other important points that need to be prescribed in order to insure yourself as much as possible against risks.