Thanks a lot everyone for an amazingly prompt response. I did leave some important details.
The CEO is a serial entrepreneur - he has sold 2 companies to Autodesk and 1 to IBM in the past. He has enabled investors to realize exit profits in the US$180 million range with his founding team member involvement. He is also a highly rated and a well renowned speaker - this is how he gets business. Also, yes - they have been consulting so far but along the way, they have several prototypes developed (to be evolved to full products dependent on funding). I guess thats where the valuation comes in.
Someone1234: I like your idea of not putting all eggs in one basket. I think he did PMV at worthworm.com. Also, the fact that someone is willing to invest $2M - 10 multiple of the seed amount is $20M. Is this how you typically validate the PMV? And yes, one of my incentives to invest is to get myself paid. Is that a good approach?
kkowalczyk : I agree consulting companies cannot scale that much. But, this is positioned to become a product company (dependent on $2M funding) - in that case, what are your thoughts?
Jeffmould: The CEO has confirmed I will be at the top of the stack. Future funding will not dilute my equity. I like your idea of convertible debt to safeguard my investment. In fact, the CEO did mention this to me - he will take this investment as a loan to be returned to me - maybe he meant convertible debt? Is there anything more I should watchout for?
auganov: Thanks for your honest answer. I don't blame you as I left out the relevant details earlier. But how can I ask for 15% for only $100K when Mr. $2M is asking only for 10%?
lxfontes: Yes, if the $2M seed comes through, they have offered me a full time employment with some common stock but without the founder shares. Founder shares will only be given with cash investment.
The CEO is a serial entrepreneur - he has sold 2 companies to Autodesk and 1 to IBM in the past. He has enabled investors to realize exit profits in the US$180 million range with his founding team member involvement. He is also a highly rated and a well renowned speaker - this is how he gets business. Also, yes - they have been consulting so far but along the way, they have several prototypes developed (to be evolved to full products dependent on funding). I guess thats where the valuation comes in.
Someone1234: I like your idea of not putting all eggs in one basket. I think he did PMV at worthworm.com. Also, the fact that someone is willing to invest $2M - 10 multiple of the seed amount is $20M. Is this how you typically validate the PMV? And yes, one of my incentives to invest is to get myself paid. Is that a good approach?
kkowalczyk : I agree consulting companies cannot scale that much. But, this is positioned to become a product company (dependent on $2M funding) - in that case, what are your thoughts?
Jeffmould: The CEO has confirmed I will be at the top of the stack. Future funding will not dilute my equity. I like your idea of convertible debt to safeguard my investment. In fact, the CEO did mention this to me - he will take this investment as a loan to be returned to me - maybe he meant convertible debt? Is there anything more I should watchout for?
auganov: Thanks for your honest answer. I don't blame you as I left out the relevant details earlier. But how can I ask for 15% for only $100K when Mr. $2M is asking only for 10%?
lxfontes: Yes, if the $2M seed comes through, they have offered me a full time employment with some common stock but without the founder shares. Founder shares will only be given with cash investment.