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6 Comments

$100k for 40%, am I wrong to laugh at this offer?

I recently got an offer from an angel investor who owns a few big media properties. At first glance I was offended by the offer. This person is well connected, and wants to tie it to milestones that would earn him the equity.

But, to be honest, it would not change anything more then what we are doing now.

  • No founder would be paid or be full-time
  • Would hire a full-time developer
  • Increase marketing spend

I would like to counter offer but considering the first one, I'm thinking we will be too far off. Should I layout the roadmap and see if he is willing to out up more?

  1. 3

    As a negotiating tactic, I would not engage further at this time. Just politely decline and say you'll stay in touch. Something like, "I appreciate your offer and consideration, but those terms are significantly off market and we don't need funding right now. Happy to stay in touch but for now we'll keep working and growing on our own."

    I don't know what angel deals look like, but yes that looks like he's being ridiculously aggressive. I know Y-Combinator's deal is 150k for 7%. Perhaps he's trying to take advantage of the coronavirus situation and trying to get a favorable deal for companies that are running out of cash and desperate for funding. Or maybe he's just looking for naive companies.

    Also, as a negotiating tactic, you'll always be better off if you have multiple offers. Keeps investors honest. So if you do want to raise capital, make it a concerted effort and talk to a lot of people with the goal of getting at least 2-3 term sheets at the same time to create a competitive bidding situation.

    If you want to counter this offer in particular, I suggest you reach out to other angel investors to get more offers on the table for negotiating leverage.

    Good luck!

    1. 1

      This offer kinda came out the blue. We were not actually seeking funding so we don't have any other offers because we were never looking. But I def agree with what you brought up.

  2. 2

    But, to be honest, it would not change anything more then what we are doing now.

    This, you don't need the investor money and it's not going to change anything for your business. So have a good laugh and keep doing what you're doing! 😉 - Pavin.

    1. 1

      Yeah, I'm going to counter for a better term with more cash that could actually change our lives.

  3. 1

    Guess it depends on what you think your current valuation is/should-be. By his calculation, the business would be worth $250,000 (roughly the 7k MRR range-ish)

    Don't be offended. It's should be flattering that someone wants to invest that amount of money in your business.

    If you don't need the money to get where you want then it's all a moot point.

    1. 1

      I'm really just doing a gut check. We are priced higher then that to me for the traction an revenue we have. All i can do is counter with a better term and see how serious he is.

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