Forums: Discussions for entrepreneurs and small business.

I'm just now launching my new venture that I funded 100%. I did everything necessary to bring this project to the launching pad - even driving the truck to install at the first location. I have every reason to believe it will be a success and I want to scale-up the venture in the near future to multiple locations.

My problem is I'm short on cash. I've spoken to certain persons (prospective partners) who expressed interest in funding my build-out.

My question: If the prospective partners put up 100% of the cash and I do everything to make the venture work, how much should I expect to receive in terms of equity in the business? Thanks in advance.

oldscout,

Ultimately, the division of equity is based upon what "everyone" agrees to.

I can't offer an opinion without more information, so here are a couple of general comments:

1. If the other party is investing in your business - the amount of equity they would receive in return would depend upon the "valuation" of the business at the time of their investment.

2. You say you have funded your new venture 100%,  yet your question is about others "putting up' 100% of the cash.

Assuming this is one business, I'd start by developing your concept of the current valuation. Although it won't necessarily be the "definitive" value - it will give you a starting point for your discussions.

 

If you'd like to discuss your specific situation, feel free to contact me directly.

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Keep in mind you have funded the business to date. You also seem to be doing most of the labor. Just because you need additional capital, don't give up 100% of your rights. Always keep a controlling interest whenever possible.

 

Build your business credit. Depending on how much you need, and if you already have some revenue coming in - you may be able to use your credit card sales (if that exists) for an advance.

 

Be care. Don't panic. Consider ALL your options. Perhaps you can meet with someone at the Small Business Association (SBA) who can help. You have options. Don't give away your entire company just because you're in a temporary pinch.

 

Good luck!

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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.

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If you can't find common ground on the valuation, one strategy that might work is to cap the potential return for the outside investor at say 2x or 3x their investment or provide a way for you to buy back the equity at some point in the future at a reasonable ROI for the investor.

 

...Tim

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