Investors can bring in much-needed funds and expertise; if you’re not careful, they can also take control of more than you bargained for.
So, how to manage that balance? Nevilson Christian, VP of Sales & Marketing at digital talent provider agency Webential, and Kate Save, Co-Founder and CEO of healthy food company Be Fit Food, provide us with their two cents.
Nevilson Christian, VP, Sales & Marketing, Webential
It varies from investor to investor, some look at the core big idea, some at the assets owned by the company, some at the market size while other core Venture Capitalists rely on financial projections. Sometimes, investors project a company’s valuation better than the Entrepreneur.
However, the basic rule can be, if the valuation you think of your company is $30 Million and the investor is investing $10 Million, you shall give a 30 percent stack to the investor. Rest the Entrepreneur can keep for themselves.
The reason to give away a healthy amount of percent is to get away from naive investors as they will be satisfied within 1-5 percent but then you will end up with unsophisticated investors who will drive you away from the real growth prospects at a later stage.
Kate Save, Co-Founder & CEO, Be Fit Food
Opening the door to investors can afford you a lot of opportunities, especially as a small business owner. When it comes to choosing the right investor though, it’s of utmost importance to consider if the investor has similar values to you. This is just as important as choosing an investor for the resources or expertise that they can offer you.
For example, when I was on Shark Tank I chose Janine Allis to invest in Be Fit Food because she was a woman in business who understood my passion for helping people improve their eating habits and overall health. Since making this choice, I have never felt pressured to compromise on my vision or my non-negotiables as a business owner in the health space.
More than that, when you find the right investor it becomes an even richer opportunity for mentorship and guidance – beyond financial backing and product advice. Instead, this investor becomes a confidant and champion as you strive towards your vision, supporting a mutually beneficial and successful working relationship.
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