I would absolutely agree with all of the posts so far - here are a few additional considerations. Here is what you have put in so far...
...cash / time / commitment / focus / identifying the business opportunity / proving the business model and this is why this is called 'Sweat Equity'.
Because you have truly invested your sweat in the business.
The reality is that by moving the concept forward towards being a real business you have mitigated the risk of loss for the forthcoming investors - that means you have created real value for them.
The next stage is to determine what that value is - i.e. what the business is worth given those contributions. This is where the wheels often come off....
The investors have one idea and the entrepreneur often has another - they rarely meet.
So a smart person once said something to me which stuck and is very relevant for this situation...
"A small slice of a big pie is better than a big slice of no pie at all..."
Ask yourself if you NEED those new investors? Can you do it without them or will the business fail? Are they nice to haves or must haves?
Knowing the answer to those questions will help you decide if you need to do this deal or if you will only do it if the terms are right.
And what are the right terms?
The real answer to that is "Whatever you are prepared to sell the X% of the business that the investors want to buy for the money". This is one of those times when the right price is whatever they are prepared to pay and what you are prepared to accept.
I'm sure (as an MBA) there is some BS MBA type formula that should tell you what the right valuation should be - but the reality is - they are just that, BS. This is a GUT thing more than a head thing.
Oh and don't forget - investors are not just for Christmas - they end up sticking around for quite some time so make sure the chemistry is right otherwise the best deal on the planet can still turn into a nightmare!
Good Luck and contact me if I can help!
All About Startup Funding
I agree with you AdvisorGarage, you are saying right that "A
small slice of a big pie is better than a big slice of no pie at all..." This is very treu that which a businessman should think.