If you were to start up an internet company, and were in need of investors for financial backing, how much do they expect back, interest, incentive etc? What legal documents, contracts would you need? How would I go about getting investors?
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If you were to start up an internet company, and were in need of investors for financial backing, how much do they expect back, interest, incentive etc? What legal documents, contracts would you need? How would I go about getting investors?
Their return would be soley dependant on any agreement you make with them. It varies so much that no one can give you a blanket answer. As for what legal documents, you MUST talk to an attorney about this. This isn't something that you would whip up on your own or grab a template off the 'net.
--Tina
This is incorrect question - the correct one - "What investors will pay you ?" As investors, in highest risk dotcom project they will request at least 60% of profits (and at least 60% of company ownership) - of course if this is serious peoples with serious investments (look $250K and up).
And if you start failing at any stage of your project - they will replace you with "their" man. When you working with investors, you don't own project anymore - they do, but still it's better do in this way rather then start another "budget" project that will fail after you get bored or run out of cash ;)
They will come with their lawyers, but I would HIGHLY recommend to have your own to avoid "selling soul" for nothing :)
Steven
P.S. I'm speaking from expirience
It really depends on what budget you are willing to accept. If you have access to alot of capital and investors then by all means accept as much as you can, but be sure you put the money in the correct departments.
Steven is partially right because it also depends on how much you have to invest.Quote:
Originally Posted by steven-v
If you were investing 40% + your time + your concept etc.... then you could realistically continue to control 50% even after you obtain investors.
It also depends on how you seek out those investors. Sometimes 10,000 $10.00 investors are better than 1 investor with $100,000.
investors = shareholders
am I right?
Technically speaking, no. Only right after they (the investors) investED, then they can be consider the shareholder. The percentage of shares varies depending on well, agreement.Quote:
Originally Posted by Zafar Ahmed
As everyone has already mentioned, it majorly depends on what you agree upon.
In the past, when I've taken up investors, I've always tried to keep it as more of a "loan." They invest, or loan, a certain amount and get a monthly, quaterly, or annual payout. At the end of the term, the contract is reviewed, and usually there's a buyout price.
Definately seek an attorney when writing up your agreements, and make sure any doubts are answered and put in writing. Just my two cents :peace:
Should it be settled on mutual agreement what happens if the project fails? Or are there any accepted legal solutions for this situation?
This question is impossible to answer. There's tons of ways to gather funding and they are vastly different. I'll just go over some of the more common ones.
Preferred Stock vs. Common Stock: (super mega condensed version)
* you need a full blown corporation to use these options an LLC won't cut it
Preferred stock:
Pro:
no loss of rights of ownership
essentially an infinite loan (varies with type)
Con:
* extremely difficult to sell with no history of dividends ie a new company
* usually have to pay dividends (virtual sharing of profits)
Investors:
* higher up on chain than common stock if company goes bankrupt
Common Stock:
Pro:
infinite loan
no dividends required
Con:
* share rights of ownership
* profits are not shared they drive the stock price which translates to investor profits and losses
* hard to sell with no company history
Investors:
* last to get money if any is left after bankruptcy
partnership:
Con:
rights of ownership distributed
profits usually shared
Pro:
costs usually shared
* shared liability if company fails (less burden on you)
Payable Liabilities
Bank Loan:
Pro:
fairly easy to obtain
Con:
* Very short term typically 90 days with 30 day progress checks
* high interest since no financial history
* mandatory repayment
Bonds:
Pro:
Like a bank loan but usually lasts 2-5 years
Con:
* must pay interest (higher since company is new)
* mandatory repayment
* harder to fnd a buyer
you can still get investors that invest by agreement(contract) right?
A shareholder is simply someone who holds one or more shares of the company. It may be an investor, or it may be your brother. Often times an investor will want shares of the company in return for an investment, but that is not always the case.Quote:
Originally Posted by Zafar Ahmed