Would you take $10,000 for a 5% stake in your startup?

A $10,000 (₦4.5M) investment in your startup in exchange for a 5% stake gives your startup a post-money valuation of $200,000 (₦90M).

Would you take it? There’s no wrong or right answer.

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Depends on the terms and the source of the money. If the investor has domain experience in my sector, and valuable infrastructure and network I can build on, and as long as they’re not demanding a board seat, I think I could forgo 5% of my company for $10,000.

Of course, this will have to be at the early-stage of the business, otherwise it makes no sense.

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I agree, I will only accept this at an early stage. It means my startup is worth ₦77.5 million in its first year.

I’m curious to understand what happens if they get a board seat though.

They can make very influential decisions. Usually they go to growth or late stage guys, I guess. Or early stage guys with substantial investment.

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I wont mind at this early stage of my business

Hi, my name is Frank , I’ve been following techpoint for quite a number of years now, you guys are doing great work.
I’m a founder of an early stage startup(prototype stage), we were bootstrapping but activity level has been really slow post covid19, we seriously need funding to move up the ladder, it’s a public safety software and hardware startup that seeks to integrate user personal security detail with the IOT all in one dashboard. Any advice?

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At the early stage, I’ll take any amount in excess of 1 million naira for less than 10% of my startup. I wouldn’t care less about any other thing but to just get traction and user growth. I’ll be more glad to own 10% of a billion naira/dollar flourishing company than 100% of a self-funded idea growing at snail pace.

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I can’t agree less. The investor needs to have some good network and domain experience that will be very important for the growth of my startup is I’m to part with 5%.

$10,000 for 5% equity stake in your company is a fair one if they have domain experience in the market that your business operate in.

If they don’t have domain experience, then i won’t advice you to take it. Here is my reasons

  1. Such small amount doesn’t increase growth in the early stage. It only give you a headway to put your business in the market.

  2. Money isn’t the goal, but strategic partnership Is.

  3. Money is never enough and will quickly get finished in few months with such amount.

So I advice you go for Investors that can help you grow your business in terms of professional advice, strategic partnership, collaboration, and subsequent investor networking opportunities.

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The stage of Investment matters here…if it were at the incorporation stage, why not , $10k from an angel at this point is a miracle.

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It depends on the round and what we actually need with respect to our goals

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You nailed it.

That is too expensive. VCs are doing $100k for 5-7% depending on your traction. I wouldn’t do that unless the value-add of the investor is tremendous. And most good investors know that sitting on too much equity limits future funding

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