equity, investment, valuation, shares, yc-how-to-start-a-startupAs a CEO when i pitched my Startup to the investor he asked me to give 50% of my company. He agrees with my investment seek and is going to work with me as a partner.
But the problem is he is asking for 50%! Now he is good at business that is definite and he will work with me in making strategies and other things for company side by side. And yeah as every new startup ceo i am not familiar with business too much so should i give him my company 50% or what strategy should i apply to convince the investor for working with me on 25-30%?
Unless that person is coming on board as a co-founder who is going to work the hours that a co-founder works I’d not consider their offer. I likely would not even try to negotiate, just not do business with them further. To move from 50% down to less than 10% is a negotiation that may just leave them feeling bad about the entire situation and less motivated - move on.
If 50% of your equity is being held by an investor then that 50% is not really doing much ‘work’. Any future investor would look at your company and likely label it un-investible. This is because any future investment would immediately dilute your share of the business to below 50%. A founder with less than 50% equity is beginning to look less incentivised as their exit (amount they receive on ‘sale’ of the business) will be smaller. It also appears that an exit will be smaller because the business does not have enough founder equity left to do another round so the choice is sell or nothing.
Denis actually summed it up very nicely with his comment.
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