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Don't be afraid to sign over 49% of your company to the perfect investor
One problem I see when someone is looking for an investor is that they aren't comfortable signing over a large chunk of their business to the perfect business partner. An investor who likes your idea knows they can boost it exponentially and has teams in place to do all the work won't be enticed with a measly 5% or 10% of your business. They will want you to sign over a minimum of 33% so they can feel like a partner and build your business with you.
Think about it, if you had a ton of money and the skills to make a business excel, would you be interested in a startup offering you 5% or 10% of their company for $XXX,XXX? NOPE! You'd want a nice chunk of the business, so you knew there was profit at the end of the tunnel, and your investment wasn't wasted. You would work harder to make more money because you owned a larger chunk than a pitiful 5%.
Below are some things to think about when bringing on the perfect investor.
They will explode your profits
If you have the perfect investor lined up, they have the skills to bring in paying customers, and you're not overly excited to sign over between 33% and 49% of your business then I don't know how you're going to keep the lights on longer than your competitors.
Even if you were to sign over 49% of your company, the investor could sky rocket your sale 10x what you were previously making, and that means you'll profit at least 5x what you were on your own. Let's do some math on this one so you can get a better idea.
If you were making $100,000 a yea with your company, signed over 49% of your business to an investor, and the investor boosted your sales 10x what they were on your own.
$100,000 x 10 = $1,000,000
50% of $1,000,000 = $500,000
That means you'd make roughly $500,000 a year owning 51% of your company and having an investor on board compared to the $100,000 a year when you were running everything on your own. These numbers are estimates and can't be taken seriously, but you get the idea lol.
They bring the right connections and skills to the business
If you're looking for an investor, you'll likely talk to the ones that compliment your business. Most investment firms or angel investors will stick to industries they're comfortable in since they have all the right connections and skills to do their best work in them. Rarely will you see an investor who always works with food companies start investing in tech companies because they don't have teams in place to boost those types of businesses as quickly.
Warren Buffet once said that one of two good investments could make you a millionaire and I'm sure that's what a lot of the investors and angels think when they sign checks. Warren Buffet also said that an investor needs to stick to his lane when investing, which means you need to only invest in what you know and love, and not branch out into something you're unsure of.
If they don't feel like an equal partner, they won't work as had
The investor Kevin "Mr. Wonderful" O'Leary always says, "5% of your company won't get me out of bed in the morning," and that's how a lot of investors think. If you're not confident in their skills, not signing over a decent amount of stock in the company, then what reason do they have to go full speed and boost your sales?
You need to be comfortable bringing on the perfect investor and signing over a decent amount of shares to them because the right person can explode your sales, popularity, and make sure you're the brand name everyone talks about.
Never sign over 51% or more unless you want to be an employee
I know I keep saying to sign over a good amount of your company, but you should never go more than 50%. I would say your maximum should be 49% and then 1% additional to the right investor who has proven themselves. You can make them work for the extra 1%, and when they hit specific goals, you can sign over the extra 1%, which would make you equal partners.
You should NEVER sign over more than 50% to your investor because as soon as the ink dries on the paper, you've become their employee and can't make any business decisions. If you feel your business can break molds, be a household brand, and truly make billions of dollars, then you should never sign over more than 49% because you want to keep control. You can sign over 50% if you're confident the investor is doing everything possible to make you both more money, but you need to be 1,000% sure before singing over a massive chunk like that.
Bringing on an investor or angel could be scary if you've never had that amount of money thrown at you before. I've never had that amount in my pocket, but I've had investors offer me $XXX,XXX for 51% - 90% of my business, and I turned them down. I'm still looking for the right investor, I know they're out there, and I'm sure I'll have something soon that will pique their curiosity lol. For you, get out there and make some money then show the investors what you can do, that will surely pique their interest and get a few of them contacting you
Thanks for reading