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I am starting a buisness with a partner. He has the funding I have the industry experince, contacts, and know-how. I will not be providing any funding and my risk is very limited other than my name in the industry. How do you put a value or a percentage on the partnership is it equal is 70/30. Help please.
Zach
You are the one with experience. If I were you I would do at least 70/30. I wouldn't go down to 50 or below for sure. If it does not work out, you can always get bank loan. It might be better that way.
You must really look at this from several angles. I have done this type of ventures where sometimes I was the investor and sometimes I was the service provider. If you are in good financial standing and can secure a loan then you have leverage. If your venture is time sensitive and fast action is required then both of you have equal footing in the matter.
I think you should do at least 70/30.
zruss - Without knowing all the details..
If your partner is acting as an angel investor or VC and assuming you are doing all the work, I would say anywhere from 5-40%. But then if new investors come in, the collective investors can hold 50-75% of the company (later stages). Generally it's in the 15-30% ownership range
However, if you are taking a salary as well then your equity decreases even more.
It's a tough road when you are the person executing w/o funds. The partner with the money always has the upper hand.
Make sure you document and have papers signed on the agreement before you start.
Good luck
This is something you two will have to agree upon. Since you aren't putting up any funding, I feel that this is a shark tank type of thing and he is "buying" a part of your company. It could be 20% or 50% - we don't know how much money is being invested so it's hard to say.
Until the business has been started and developed its little more than an idea. If you can do the business without this investor then you have leverage....if you cannot then you obviously have less leverage. However, you are concerning yourself about a share of a pie that has yet to exist....I would be much more focused on how best to develop the idea rather than being overly concerned about carving up an imaginary pie.
In short - make a decision, get the cash and move on today....don't second guess the future and the additional value this person can bring. In your shoes, I think I would do the deal for at least 51% so you can drive the business forward based on your experience rather than committee....so anything more than 51% (controlling interest) in your pocket is upside.
Long story short - do the deal - move on - focus on creating value and building a kick butt business and don't waste time worrying about dividing up something that is yet to exist.
Any questions just ask.
Andrew
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