Should I give away equity in my business

[Bitcoin]

Tell us what type of business it is. Actually I want to know what are the benefits of having just 10%. You still have primary control over everything since you own 90%. What does your IT sales friend get.

I'm in the optics/transceivers business for internet connectivity. Everything is going to the web so optics are becoming more and more of a need at higher speeds. I see 100 and 200Gs around the corner.

 

[Bitcoin]

This is what I used to do and still do on the side for a living TS. I was basically a VC with a focus on brokering Equity investments in companies.

You do not provide enough information to answer your question properly but here are some thoughts and points to consider.

If you are a control freak then this may be a bad idea for you. You can have a successful business as a control freak but it will be limited in size to how many cycles you have because of your need to put your fingers in everything and inability to empower and trust. As a first rule I would never direct an equity investor into an investment with someone who is a control freak.

If he is not putting in Cash into your business make the Equity an 'Earn In' tied to goals and deliverables.

The simple equation I use and pose to all my prior clients looking to give up equity in their company is this, 'what real value (not future or projected) can you defend for your equity today? And what 'real value' can you put on the Investment today (dollars or service)? If the 'real value' of the INVESTMENT today is greater than the 'real value' of your equity today, it is always a good trade and you should take the investment'.

I greatly appreciate this feedback. I've been too immature in how I view business and need to really focus on moving things forward the right way. I need structure and expertise that I admit I didn't really apply the past ten years. It's my fault and no one elses. I know this is a risk but that is why I need to get answers by mid September as I want to make a decision either way.

 

[Bitcoin]

Take his wife as collateral

He is not married. lol

 

[DeepCover]

I'm in the optics/transceivers business for internet connectivity. Everything is going to the web so optics are becoming more and more of a need at higher speeds. I see 100 and 200Gs around the corner.

Why not give this detail upfront in the OP? This is Sherdog for Christ’s sake. No offense, but for all we know you could own a lawn mowing business.

In general, my answer would be no, based on what you’ve provided. However, it’s not uncommon if you truly think he can deliver the results you feel like your business needs. I would certainly explore all other viable options (surely he’s not the only one that can deliver results) before giving into his request.

 

[Bitcoin]

Why not give this detail upfront in the OP? This is Sherdog for Christ’s sake. No offense, but for all we know you could own a lawn mowing business.

In general, my answer would be no, based on what you’ve provided. However, it’s not uncommon if you truly think he can deliver the results you feel like your business needs. I would certainly explore all other viable options (surely he’s not the only one that can deliver results) before giving into his request.

That's true. I should have said what my business was up front but it's hard for me to open up.

I'm in that mindset where I feel I can only go as far by myself and another invested partner who wants to see my business get into the millions would benefit me.

 

[MadSquabbles500]

I'm in the optics/transceivers business for internet connectivity. Everything is going to the web so optics are becoming more and more of a need at higher speeds. I see 100 and 200Gs around the corner.

Are you some kind of installer, or do you actually make the hardware, and this guy wants to be your salesman? And what are the by-laws of company? Is he allowed to sell his shares to anyone? Can he just pull out petty cash for owner whenever he wants?

 

[Cubo de Sangre]

If you can afford to pay someone then don't part with equity.

 

[Bitcoin]

Are you some kind of installer, or do you actually make the hardware, and this guy wants to be your salesman? And what are the by-laws of company? Is he allowed to sell his shares to anyone? Can he just pull out petty cash for owner whenever he wants?

I don't touch anything, I just supply the part. He knows this field is lucrative so he wants in.

We haven't discussed the logistics just yet in depth but it's coming to that point where we really need to address all the issues involved in equity. This wasn't my intent until three months ago as he has been asking about it and I need to evaluate the growth of my business moving forward.

There's a part of me that wants to just keep it simple and stressfree and not look at growing it exponentially but I know that could be detrimental to my business as I dont have the sales funnel filled and am relying on my main core clients.

 

[UFC=Pride]

I wouldn't do it

 

[Mondo Freaks]

Its called sweat equity. They dont put in capital but they provide a service.

 

[Kowboy Karl]

I am contemplating giving 10% of my business to an IT sales friend to try and have him help me grow the business.

I've been a control freak my whole life so this is a big step for me.

I haven't agreed to anything but he isn't willing to do any commission splits and wants equity in the business.
this is sort of like a marriage so I know it's a big step.

I thought about making the decision after he comes back from vacation.

What’s the net worth of the business

If your in the early life cycle of a business and are looking for growth it could be a good deal.

If you have a 50 million coming in 5 million seems like quite the gamble

See my point?

 

[Bitcoin]

Its called sweat equity. They dont put in capital but they provide a service.

He is offering 20K which we both know is way below what my business is worth but he emphasizes the sweat equity.

 

[Bitcoin]

What’s the net worth of the business

If your in the early life cycle of a business and are looking for growth it could be a good deal.

If you have a 50 million coming in 5 million seems like quite the gamble

See my point?

I've never had or desired to have my business officially appraised. But the potential investor and I both believe it's worth millions though my sales don't reflect it. It's more in the market I'm in.

 

[Kowboy Karl]

I've never had or desired to have my business officially appraised. But the potential investor and I both believe it's worth millions though my sales don't reflect it. It's more in the market I'm in.

I say go for it if you trust this individual.

Sales are everything and if he has the work ethic to pursue this role and increase it in exchange for 10% that’s a bargain.

That’s my assessment without knowing the game youre in

 

[Bitcoin]

I say go for it if you trust this individual.

Sales are everything and if he has the work ethic to pursue this role and increase it in exchange for 10% that’s a bargain.

That’s my assessment without knowing the game youre in

I'm at the point where I have to trust someone and I've known him for about 18 years.

I'm in the IT network components space.

 

[Graves The Elder]

this is sort of like a marriage so I know it's a big step.

OO LA LA

 

[Kowboy Karl]

I'm at the point where I have to trust someone and I've known him for about 18 years.

I'm in the IT network components space.

I say go for it lol

Everything to gain not much to lose

Just try and put some performance clauses in the agreement

 

[Mondo Freaks]

He is offering 20K which we both know is way below what my business is worth but he emphasizes the sweat equity.

It all depends on the contract . You can give him 10% without giving any decsion making abilities. Also, you will win no matter what. If you have a sharholder meeting, you will have 90% voting power whereas he will have 10%.

 

[Bitcoin]

I say go for it lol

Everything to gain not much to lose

Just try and put some performance clauses in the agreement

Thanks! I lack that extra professionalism and this is one way that potentially makes me improve whether I like it or not. Sort of like marriage again or having kids. lol

 

[Bitcoin]

It all depends on the contract . You can give him 10% without giving any decsion making abilities. Also, you will win no matter what. If you have a sharholder meeting, you will have 90% voting power whereas he will have 10%.

This is so foreign to me that the advice you provide at least opens my eyes to the options I have.

This is not do or die but more of getting my business to the next level or die trying. Ok I exaggerate lol