As a business, you may be approached by an investor who is interested in giving you money in exchange for a percentage of your company. This can be a great opportunity to get your company off the ground, but it’s important to make sure you’re getting a fair deal. So, what is a fair percentage for an investor? Peter DeCaprio answers.
How to Determine The Percentage To Offer An Investor? Peter DeCaprio Explains
There are a number of different ways to answer the question, “What is a fair percentage for an investor?”
To begin with, it is important to understand that there is no single right or wrong answer to this question. It ultimately depends on a number of factors, including the particular circumstances of the investment, the level of risk involved, and the expectations of both the investor and the company receiving the investment.
That said, there are some general guidelines that can be useful in determining what is a fair percentage for an investor, says Peter DeCaprio. For example, AngelList – a website that connects startup companies with potential investors – typically recommends that startups offer investors between 10% and 20% equity in the company.
This range reflects the fact that early-stage investments are generally riskier than later-stage investments and thus require a higher level of return in order for the investor to make a profit. However, it is also important to remember that each individual investment is unique, and so the percentage offered may be higher or lower depending on the specific situation.
Ultimately, what is most important is that both the investor and the company feel like they are getting a fair deal. If one side feels like they are being taken advantage of, it is likely that the relationship will not be fruitful. By taking the time to negotiate and reach an agreement that works well for both parties, everyone involved can help ensure that the investment is a success.
How To Determine The Percentage
There are a few key things to keep in mind when trying to determine the percentage to give to your investors.
1. Company Stage: The first thing to consider is what stage your company is in. If you are just starting out, you may want to give a higher percentage to incentivize investors. As your company grows and becomes more established, you can start to lower the percentage given to investors.
2. Investor Type: The next thing to consider, according to Peter DeCaprio, is the type of investor you are working with. If it is a venture capital firm, it may want a higher percentage since they are taking on more risk. Family and friends may be more willing to take a lower percentage since they are not as focused on making a return.
3. Company Valuation: The final thing to consider is your company’s valuation. If your company is valued at $1 million, giving up 10% would mean giving up $100,000. However, if your company is valued at $10 million, giving up 10% would only mean giving up $1 million. This can help you to determine how much equity you are willing to give up.
Peter DeCaprio’s Concluding Thoughts
Giving investors a percentage of your company can be a tough decision. You want to make sure that you are giving them enough to incentive them, but not so much that it will dilute your own ownership stake too much. Ultimately, the decision of how much equity to give to investors comes down to you and what you are comfortable with, says Peter DeCaprio. There is no right or wrong answer, but these are some things to keep in mind as you make your decision.