

We've Been Offered Investment Which Values Our Venture At $1.9 Million - Should We Take It? - bugmenot

We've received a serious unsolicited offer of 1000 pounds (US$1945) for a 0.1% stake in our venture. Should we take it? We don't need the cash. However, the investment is smart money - although with limited contacts.<p>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.<p>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.<p>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?
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webwright
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.

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pg
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.

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rms
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.

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nootopian
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](http://www.eisa.org.uk/render.aspx?siteID=1&navIDs=21,97)

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gigamon
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.

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rms
Yeah... convertible debt is the way to go.

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lisper
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.

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dkokelley
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.

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kul
Take the money.

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ALee
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

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jamiequint
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)

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flashgordon
What does the money buy you? (With limited contacts, how smart is his smart
money?)

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bugmenot
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.

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ph0rque
Where do you see a delete button?

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brett
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>

