how much should investor get so I got a
great question in front of my YouTube
viewers Sergey love you guys who wrote
in the say I have a difficult question
for me and for many people one person
inventor believed in me and put money in
my business for example $1000 the
question is how do I divide with him the
profits what percentage to give him and
what terms and what time frame possible
and for how long I run a business on
100% he is only the investor thank you
pH would be great to commit a video
response for all how to make a
relationship with investors so Sergey
here is your video now this is a common
question and as entrepreneurs you know
we want to often raise capital if you
can’t do it ourselves we need we need
money to launch this thing and make it
big time there are four main ways to
structure a deal with an investor and
each deal is different so there’s no
easy way to say hey if it gives you
$1,000 and here’s how you want to pay it
back each single deal every deal is
different this is coming from background
and angel and venture capital investing
so give you the four options and you can
see what feels right and how you want to
match it up with your investor the first
is dead so debt is a loan they don’t own
any of your business but they’re giving
you money that you have to pay back and
to give you $1,000 maybe you say it’s a
10 percent interest rate and every year
you have to pay that 10 percent plus
some of the principal down just like
going to a bank and getting a loan but
often the rates are going to be a lot
more favorable towards the investor than
you obviously often you would go when
you can’t get a loan from a bank because
it’s too risky so you have to pay a
premium but that’s death number two is
equity so equity is their taking a piece
of your company so they don’t you don’t
have to pay them anything back on a
monthly basis or quarterly basis or
whatever it is but they own part of your
company so if they’re giving you $1,000
maybe they get 10% of your company now
that’s that’s a pretty low terrible
evaluation but basically what you’re
deciding is okay our business is worth
this amount of money so if your business
is worth $10,000 that’s what we think
our business is worth today
and by you giving us $1,000 then we’re
going to give you 10% and how that
person gets paid is when either you do a
dividend from the company to the
shareholders and you know you’ll get 90
percent of the dividend and they’ll get
10% of the dividend or ultimately the
goal is when you sell the company right
when you sell the company you get bought
for 10 million dollars they get a
million dollars because they own 10% and
you get 9 million dollars so that’s the
exit strategy but it’s a typically a lot
longer play because you got to build up
the company to get acquired number 3 is
convertible debt with convertible that
it’s a mix of the two so this is
favorable for the investors a lot more
than the entrepreneur but typically how
it works is the investor gets a loan
that they’re they’re getting paid so
you’re making them monthly payments on
the loan but at any point the investor
can convert that to equity so if they
feel like you’re going to make a big
deal you’re going to you’re going to get
sold you’re going to start paying
dividends then they can say ok you know
what I don’t want that anymore I’m going
to convert that into equity so it’s a
great way for investors to lower their
risk right there they’re getting paid
monthly from you for their debt and then
whenever they see an opportunity to get
to the equity because it’s going to be
favorable for them they say okay we’re
going to convert our debt and turn it
into equity so not as great for the
entrepreneur but a great deal for
investors and a super common for a lot
of angel investors number four is
royalties and here the investor is not
taking a piece of your company you’re
not paying them back a certain fee every
month on a loan but they take a
percentage of every sale that you make
off the top so whatever product you’re
selling if it’s a hundred dollar product
and they say okay I want a five percent
royalty so that I’m going to give you
the thousand dollars and every time you
make a sale I’m going to take five
percent of that so if you’re selling it
for hundred bucks every time you make a
sale you’re paying them five dollars but
they don’t own any of your business and
you don’t own any debt that you have to
pay them back so it’s another common
model to use and often they’ll still mix
it up they’ll say I want debt with a
royalty or I want equity
with the world – I want some debt and
some equity every single deal is
different but those are the four main
components
so just to recap again number one is
debt
number two is equity number three is
convertible debt and number four is
royalty one last thing I want to remind
you guys about is when you’re bringing
on an investor you don’t just want money
okay you want somebody who can bring
more to the table you want somebody who
can give you advice on how to grow
business you want somebody’s going to
open doors and make connections for you
you want somebody who might help you get
into the media or might bring on new
customers for your company you want more
than just the money because you have a
limited amount of people who you can
bring on board right you only have so
much debt you can take on you only have
so much equity you can give away you’ll
have so much of a world so you can get
to somebody and you want to make sure
that the people you bring on are
strategic and really want to help you
instead of just giving you money so
always have that caveat in the back your
mind think about this first you bringing
in it’s like great I need the money
awesome but what else can they bring to
the table besides the money belief fools
we’re watching like the video you can
support me by clicking on the link in
the description leave a comment let me
know what you think ask the question if
you want to make a video reply for you
and click on my face subscribe to the
channel thank you so much I’ll see you
soon
great question in front of my YouTube
viewers Sergey love you guys who wrote
in the say I have a difficult question
for me and for many people one person
inventor believed in me and put money in
my business for example $1000 the
question is how do I divide with him the
profits what percentage to give him and
what terms and what time frame possible
and for how long I run a business on
100% he is only the investor thank you
pH would be great to commit a video
response for all how to make a
relationship with investors so Sergey
here is your video now this is a common
question and as entrepreneurs you know
we want to often raise capital if you
can’t do it ourselves we need we need
money to launch this thing and make it
big time there are four main ways to
structure a deal with an investor and
each deal is different so there’s no
easy way to say hey if it gives you
$1,000 and here’s how you want to pay it
back each single deal every deal is
different this is coming from background
and angel and venture capital investing
so give you the four options and you can
see what feels right and how you want to
match it up with your investor the first
is dead so debt is a loan they don’t own
any of your business but they’re giving
you money that you have to pay back and
to give you $1,000 maybe you say it’s a
10 percent interest rate and every year
you have to pay that 10 percent plus
some of the principal down just like
going to a bank and getting a loan but
often the rates are going to be a lot
more favorable towards the investor than
you obviously often you would go when
you can’t get a loan from a bank because
it’s too risky so you have to pay a
premium but that’s death number two is
equity so equity is their taking a piece
of your company so they don’t you don’t
have to pay them anything back on a
monthly basis or quarterly basis or
whatever it is but they own part of your
company so if they’re giving you $1,000
maybe they get 10% of your company now
that’s that’s a pretty low terrible
evaluation but basically what you’re
deciding is okay our business is worth
this amount of money so if your business
is worth $10,000 that’s what we think
our business is worth today
and by you giving us $1,000 then we’re
going to give you 10% and how that
person gets paid is when either you do a
dividend from the company to the
shareholders and you know you’ll get 90
percent of the dividend and they’ll get
10% of the dividend or ultimately the
goal is when you sell the company right
when you sell the company you get bought
for 10 million dollars they get a
million dollars because they own 10% and
you get 9 million dollars so that’s the
exit strategy but it’s a typically a lot
longer play because you got to build up
the company to get acquired number 3 is
convertible debt with convertible that
it’s a mix of the two so this is
favorable for the investors a lot more
than the entrepreneur but typically how
it works is the investor gets a loan
that they’re they’re getting paid so
you’re making them monthly payments on
the loan but at any point the investor
can convert that to equity so if they
feel like you’re going to make a big
deal you’re going to you’re going to get
sold you’re going to start paying
dividends then they can say ok you know
what I don’t want that anymore I’m going
to convert that into equity so it’s a
great way for investors to lower their
risk right there they’re getting paid
monthly from you for their debt and then
whenever they see an opportunity to get
to the equity because it’s going to be
favorable for them they say okay we’re
going to convert our debt and turn it
into equity so not as great for the
entrepreneur but a great deal for
investors and a super common for a lot
of angel investors number four is
royalties and here the investor is not
taking a piece of your company you’re
not paying them back a certain fee every
month on a loan but they take a
percentage of every sale that you make
off the top so whatever product you’re
selling if it’s a hundred dollar product
and they say okay I want a five percent
royalty so that I’m going to give you
the thousand dollars and every time you
make a sale I’m going to take five
percent of that so if you’re selling it
for hundred bucks every time you make a
sale you’re paying them five dollars but
they don’t own any of your business and
you don’t own any debt that you have to
pay them back so it’s another common
model to use and often they’ll still mix
it up they’ll say I want debt with a
royalty or I want equity
with the world – I want some debt and
some equity every single deal is
different but those are the four main
components
so just to recap again number one is
debt
number two is equity number three is
convertible debt and number four is
royalty one last thing I want to remind
you guys about is when you’re bringing
on an investor you don’t just want money
okay you want somebody who can bring
more to the table you want somebody who
can give you advice on how to grow
business you want somebody’s going to
open doors and make connections for you
you want somebody who might help you get
into the media or might bring on new
customers for your company you want more
than just the money because you have a
limited amount of people who you can
bring on board right you only have so
much debt you can take on you only have
so much equity you can give away you’ll
have so much of a world so you can get
to somebody and you want to make sure
that the people you bring on are
strategic and really want to help you
instead of just giving you money so
always have that caveat in the back your
mind think about this first you bringing
in it’s like great I need the money
awesome but what else can they bring to
the table besides the money belief fools
we’re watching like the video you can
support me by clicking on the link in
the description leave a comment let me
know what you think ask the question if
you want to make a video reply for you
and click on my face subscribe to the
channel thank you so much I’ll see you
soon
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