We've Been Offered Investment Which Values Our Venture At $1.9 Million - Should We Take It?
10 comments
He's smart money, but unable to invest more than $2k and has no connections? It's not worth the time or legal fees to do it.
I'd wait till the next round you raise, and just include him in that. It's not just that £1000 is not worth the trouble. It would look lame to many potential future investors to have done a round that small.
Also, if your investor doesn't want to do convertible debt and you don't want to incorporate, you could just do it very informal style, and say that he gets .1% in your company whenever you guys do incorporate. Presumably he trusts you if he is willing to invest in you.
If you do think it might be a good idea you might want to take a look at the Enterprise Investment Scheme in the UK which provides a whole bunch of tax incentives for someone making this sort of investment.
http://www.eisa.org.uk/render.aspx?siteID=1&navIDs=21,97
Take it as a redeemable loan with the condition that it will be converted into equity upon closing of your next (first) round of investment. You don't need a lawyer for this, just write it in plain English so everyone can understand.
Yeah... convertible debt is the way to go.
I agree. Taking an equity investment at a too-high valuation can jeopardize your chances of getting more money down the road. If, as you say, you don't need the cash and you're doing this for the connections, just give them the 0.1% in exchange for their services as a consultant. Taking such a tiny amount of cash for equity will be more trouble than it's worth.
If you don't need the money, and he has nothing to offer in terms of contacts, what good will come of it? You'll be giving up 0.1% of your company, and more importantly, telling any potential future investors that you are worth over $1,000,000. I think this will make it more difficult when a potential angel investor comes along with a serious investment offer and plenty of contacts.
Take the money.
No. Unless the investor is someone who will be a strategic angel (great name to push for future funding). The amount does not seem anywhere near competitive.
Any joe out there can invest $2k, if he's even a slightly serious angel, he would put more in.
-Andrew
Any joe out there can invest $2k, if he's even a slightly serious angel, he would put more in.
-Andrew
does the UK have rules about being an accredited investor? If he can only afford £1k the investor most likely wouldn't meet these terms (at least in the US where the minimum requirement is $1M net worth excluding primary residence or an annual income of somewhere around $300k)
What does the money buy you? (With limited contacts, how smart is his smart money?)
It's really very easy to make an anonymous account on this site. In fact, it is easier than going to bugmenot.com. And the way you did this, a malicious person could come along and delete this story.
Where do you see a delete button?
The point is that the original poster used a bugmenot account to post this and thus anyone using the same account can delete this post.
http://www.bugmenot.com/view/news.ycombinator.com
http://www.bugmenot.com/view/news.ycombinator.com
We haven't incorporated. Indeed, we're inclined to decline the offer because we'd have to formalise the paperwork prematurely and this could prejudice further investment.
The offer was not a take-it-or-leave offer. It is a standing offer which is unlikely to increase due to the budget of our potential investor.
Should we get seed funding with better contacts? The most optimistic valuation from YCombinator (US$20000 for 2%) gives a maximum valuation of $1 million. Should we defer this 1000 pound investment until after we get seed money with better contacts?