- The Venture Adventure
- Getting the Latest News on Venture Capital
- Money from Angels
- Adventure Capitalists
- Business Development Agencies
- Money from Corporations
- How Much Will You Have to Give Up in Exchange for Investment Capital?
- Doing Your Own Valuation
- Small Business Investment Companies
- National Association of Small Business Investment Companies
- Folks Who Might Have Money for You
- The National Venture Capital Association
- Show Me the Money!
How Much Will You Have to Give Up in Exchange for Investment Capital?
It would be nice if there was an easy answer to this question. But there isn't. I could make up an easy answer but it wouldn't be accurate and that would make us both feel badly.
When investors consider how much stock in your company to request in exchange for their investment, they first attempt to price your company. They determine how long it will be before you could reasonably be expected to go public because that is where they think the big money is. They also will try to figure out what your company's value will be at that time.
They will think hard about how much money your company will need to make it to your IPO. What if your company fails? They will ponder long and hard about how likely a failure might be. If your company does fail, they will try to predict how much of their money they could get back, if any.
This is their money, after all, and we can't blame them for trying to figure out how risky your company is before they sink a few million genuine American dollars into it.
Investors also consider how the stock market is doing and how companies similar to yours are doing. If there seems to be some science mixed in with some guesswork as you consider all this, you're right. But the guesswork is educated guesswork, we guess.