We have a "angel investor" interested in our project, however he wants 65% is that standard?

[reviewmyplace]

We are about to launch a social media project, and have a angel investor interested in our project. Is 65% standard or is he looking for too much.

thanks.

[Elana]

Kind of depends on how much he's investing, right?

[Helen M]

There isn't really a 'standard'. if you don't like this offer, and have no other offers on the table, my advice would be to reveiw your business plan and cashflow projections and see if you have any other options.

Think about the following:

How much risk are you asking this 'angel' to take, ie how likely is it that he'll lose his investment?

How badly do you need his money?

How much are you personally prepared to risk to keep more of your project?

How much profit do you expect to make?

Do you have any other options - for example, couldn't you borrow from the banks?

Weigh up what you really need and what you're prepared to risk. If your 'angel' is putting up all the cash and you're contributing ideas and experience, then I can see his point. If this project folds, you've lost nothing - you still have your ideas and experience - but he's lost a lot of money with nothing to show for it.

If you're expecting a big profit, then 35% of a lot of money is still a lot of money. If you don't expect to make much money, but want him to put in most or all of the capital, 65% of a small profit may not be very much.

Best of luck with your launch.

[Feeling Mutual]

There is no standard. It is what you negociate.

But make sure it is a percentage of the net profit and not the gross.

[OrangeKitten]

65% of what? Profits? Equity stake? What kind of method did you use to forecast and calculate your business' worth? you DID do some calculations, right? If not, you better start doing some research immediately before you sign anything. Else, your approach is no different than walking into a car dearlership and asking the sales guy "how much" for this car.

[mistercasino]

I recently completed my MBA degree and this is a question that keeps coming up. There is a formula that an Angel Investor will use to calculate how much ownership they will want. As another person mentioned, this will be determined by the perceived risk of the business, as well as the expected profit.

You may be willing to give up a higher percentage of the business if the investor gets you the money you need when you need it.

You can also look at it from a layman's point of view:
Would you rather have 35% ownership of a successful business, or 100% ownership of one that failed?

Sometimes enough positive cash flow (in the form of an Angel Investor) will get your business up and running. Then you can focus on the business/technical end of the project, rather than dividing your time focusing on finance and finding ways to raise more capital.

[dan]

The deal is the deal as they say. if he wants 65% and you want their money, that's the way it goes. But the next question is: 65% of what. Normally, with a corporation with one class of stock, that a controlling share. Does this person want to control the project, or just receive a return on his or her investment. If they just want a ROI, you might want two classes of stock: common (and you keep that for control) and preferred (rights to dividends and income).