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Had an offer for someone to invest $30,000 for a return of 5% (alien.top)

submitted 9 months ago by Nivsy_21@alien.top to c/entrepreneur@indiehackers.space

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Someone wanted to invest 30k into my landscape company for 5% return, now I’m not the smartest guy out there and someone is free to correct me if I’m wrong but shouldn’t that 5% be until the loan is paid off and not until I give the company up

Again I’m very new to this so I could be looking at this horribly wrong

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[–] TO_GOF@alien.top 1 points 9 months ago (14 children)

Going merely off of what you stated:

They want an equity stake in your company, you would own 95% and they would own 5%. They have also valued your company at $600,000. If you take their money you wouldn’t owe them anything but they would be part owner of your company though you would retain full control.

Do you believe your company is worth $600,000? Do you need the $30,000? If you feel your company isn’t worth $600,000 then this might be a good deal. If you need the $30,000 to help you expand then this might be a good deal.

If your company is worth more than $600,000 then it’s probably a bad deal and if you do not need the $30,000 for any reason then it is a bad deal.

[–] Enkis_Champion@alien.top 1 points 9 months ago (3 children)

It’s not necessary that they would retain full control. It’s atypical but the investor could ask for a new super voting share class to be created giving them say 25 votes per share. Then the entrepreneur would keep the majority stake but lose the controlling interest. My advice: look at the term sheet Carefully! Also is your business really worth 600k given the future value of your cash flows? Make sure you get a fair deal :)

[–] TO_GOF@alien.top 1 points 9 months ago (1 children)

I think he is better served by hiring his own lawyer to advise him if he is given a contract drawn up the investor.

[–] RawDogRandom17@alien.top 1 points 9 months ago (1 children)

It would cost over $2k to have a lawyer review a $30k equity deal

[–] behrific@alien.top 1 points 9 months ago

I’m not one to get an attorney over most business matters, but selling equity is one that calls for an attorney 100% of the time.

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