Deepak Singh .

Hey guys!!

Need your suggestions in this scenario 👇👇

My friend has received an investment offer for his startup which is pre revenue but with good concept and traction.

But the investors are asking majority in the stake (greater than 50%) saying the startup is yet to prove itself and is pre-revenue. 🤔

He wants the investors to invest in but stake is too high for him to give!

Can you guys help in raising some SOLID NEGOTIATION POINTS?

PS. He want to examine mind of investor behind his offer. How can he go about that?

Thank you in advance✌️

Originally Posted Here

Kshitij Patil

1. The fact that they're asking for 51% proves two things:

a. The investors believe in the product.

b. The investors do not believe in the founder.

2. As an entrepreneur he should be ready to walk away from this deal, otherwise, the conviction will never be communicated to the investors about his final decision.

3. Think of it this way, the moment he gives them the controlling shares, he will have essentially walked away from the startup in a way and has become an overpaid employee.

4. Any investor who wants to own more than 20% of the company doesn't have the vision or faith in the need of the startup to raise more capital in the future. They're just been untrusting and greedy. Why would you want such investors?

5. Tell your friend to tell the investor not to consider how much the startup's evaluation becomes if they take 20% or less stake. The company needs to have a stake to sell and raise funds in the future. Giving 50% would cripple the company on day 1.

It's like hitting Virat Kohli in the knee before he walks out the pavilion and telling him to score a double century and win the series.

Deepak Singh

Yes, totally agree with you! Would convey him your message!

Ashutosh Titoria

How much they are investing?

Deepak Singh

I don't know the exactly but somewhere around 51or 55%

Ashutosh Titoria

I asked this, to know about how much your friend required to prove his ability and his startup market fit.
Then I may suggest you to go with..
Because this clear that your friend must not go with them, who are asking 50%+

Shlok Joshi

Don’t go for it, get to know the investor. Also remember giving up control now, means it will be difficult to raise in subsequent rounds and you will end up with little stake in the company over time.

Deepak Singh

Got it! Any tactics to reduce this percentage?

Shlok Joshi

you’re desperate for the cash, he knows that. He is desperate for control, we all know that. You need to take a stand and ask yourself. If I take the money, what will I lose in the process, how much do I still have a say over. You’re essentially giving him your equity to go work for him. That’s true for any investor, but your giving far too much away before starting out.

Kshitij Patil

If I were in his place, I would ask the investors point blank:

"You want 50%+ of my Co proves you trust the product. But why don't you trust ME to grow it? Taking away controlling interest basically cripples my ability to DECIDE. I want to work with you, but for that, you need to be able to have faith in me. Which there is a clear lack of. So let me know what would make you have faith in my ability to execute?"

So if they say go get a business degree, fine.

If they say go get yourself some training in an incubator, fine.

If they say go achieve XX revenue, fine.

I'll decide what to do based on what they say.

It's a business deal, not a sale.

Know the difference and ATTACK!

Vikrant Keer

Not to give away control if the start up is his passion.Be it any money.

Vishal Rewari

This is what I would do

I would never go to investor till I have a product market fit and revenue

If I do that this is exactly what will happen

Rather to save my share I will achieve the product market fit get initial traction and then raise money as operation expenditures to fire up the sales and team and operations

Deepak Singh

Have you been in this situation before? I mean can we not influence the investors here?

Vishal Rewari

i am in this situation someone is really after me. But I know I am worth more .

Watch shark tank any investor who went on to take more percentage Mark Cuban asked him or her to reconsider and they advice not to give that much stake away as once it is gone it is not coming back. There are many investors, best one is the customer

Devashish Datt Mamgain

If its angel investor then probably investors are not matured and it's not recommended to sign a deal for more than 50%

Harish Ibrahim

Run or be ready to be a slave.

There are many investors with surplus money, but not all know how startups works. If you took a money from a realtor, He might expect it grow like a real estate project. Unrealistic expectation and business practices can mess up the entire thing.

Sibendra Mallick

Give it, do it for a while, exit and start a new one with the profit you are yielding there, there will be no point of staying in the company. 🤔

Mahtab Alam

If you are really desperate for investment then one way can be to convince the investors to issue you further shares linked to your actual timebound performance in a way that your stakes increase to about 60%. Please understand that the investor also needs you to run and grow the business. Else he would do it himself by keeping employees just like you are going to do it.

Angik Sarkar

Under no condition, give an investor >50% stake initially. The company will likely never grow.

Give him/her two options: Buy company outright for X and pay a Salary Or lower stake.

I would run away from an investor that even demands 50%+. Any savvy investor realizes that founders need to have skin in the game to succeed.

Sathish CP

It depends. If he is so sure about the idea and the concept, req him to manage initial working capital and validate the concept or take it to the next level from what it is today. And then go for the seed investment, even in that case you should dilute more than 15%. I would go with the deal only if I am selling stakes at my business to make some money for myself and the company. This is not seed or angel investment, its an partnership or acquisition.

Vineet Nandan Gupta

Don’t take the Deal... you will be their slave... No Negotiation

Anujeet Bhattacharya

That is the problem to take investment ,you became slave .Most of the profit they will take away.

Divyansh Sharma

The investors that you're talking about about are really not investors and only look money lenders as the real ones don't ask for majority stake, and ask stake depending upon the business model, revenue stage. My advice is to directly refuse this offer as they might ruin all in future trying to manage everything by themselves, and not let your guy do the real work.

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