Offering 5% equity stake for $5000 investment (I'll also pay you back)

alright, if you've seen any of my other threads, you'll know that I have been seeking investing for my company Write In Your Vote for a while...

Originally, I needed $15,000-$20,000 worth of investements. I've raised enough money from family members that this number is now at around $5000.

I'm offering a 5% stake in the company and a complete repayment of the $5000 within 5 months. I realize that this may be a unordothdox way of doing things, but I'm fine with that. Legalities aside, I want this to be a formal, close relationship.

I didn't give any equity away to anybody else that loaned me money, so you would be the only investor.

PM me if you are interested in this opportunity, I can send a business plan and much more info upon request.

thanks!

Andrew DuVal

 

What will the money be going towards?

 

5k for a 5% stake in the company no thanks maybe if it were 25%

 

Couple of quick things:

1. Have you filed with the SEC to seek investment?
2. How have you valued your company at $100,000? 5% = $5,000 x 20 = 100% or $100,000. IE what did you use to reach that evaluation.

and for all of the other questions...

3. Have you tried for a small business loan?
4. Tapping credit cards? New credit cards? - This shouldnt be a problem to do if you really believe in the business.
5. Do you have cash in reserves to make it through until you are profitable?
6. What format are you looking to incorporate in?

Hundreds of other questions, but the first question kind of makes the others moot...

Don't mean to rain on your parade, just giving you advice I wish I had looong looong looong ago...

 

You need to post a set of accounts or an asset liability statement!
$5000 should be 90% in any new start I have seen sorry

 

Since he's giving you back the $5,000 in 5 months, the 5% stake is actually your interest.

If he's valued it at $20,000 like he said he was going to raise, that 5% stake would be worth $1000, which is 20% return.

Annualized it's a 48% return if the company merely retains its current value. Not bad. Granted, the risk of default is significantly higher than most other investments you'd make.

 

Any answer Andrew DuVal ?

 

I suppose you COULD look at it that way, but would still be illegal. Also he specifically mentioned 5% for $5,000, but he will pay it back.

 

id want that 5000 back with the 5% interest, and the investment if i was the investor. And i won't be, to high risk, honestly, 5k is not that hard to come up with, go to a bank for a loan or something. Plus A VALUATION OF 100,000 is insane for a website that isn't functioning fully (i assume its not hence why you need the money), how much is it making you now? you'd need to give more details to potential investors... just my 2 cents.

 

Most banks don't loan money for start ups, look for a local angel investor. Do you have a business plan?

 

good point, then prehaps a high risk investor as you stated, A BUSINESS PLAN IS A MUST, also if you've got the majority of the money from your family and friends, just try to get the rest from there they're a lot easier to work with and dont come to bite you in the behind later.

 

Be practical, banks and investors first want to see the business running and profits before they decide to have a stake in your company........

 

I have invested in a few startups in the last 3 years, and while Im not what you would call a prolific investor, lets just say that Im happy with whats happened with a few projects

ANYWAY - Not I, nor anyone else with any sense would make this investment, unless you have a clearly structured business plan, legal documentation (ie. a company setup in which you are selling shares and all assets belong to that company) and a genuinely good idea.

The amount of information that you are forthcoming with just does not merit even thinking about this idea, its a no brainer to just say "no".

so in short, dont be disheartened, but for gods sake, come up with an EXACT plan of action and proposal for any investors, otherwise you just end up looking like a kid in a grownups world....

 

sorry everyone! I've been really busy getting ready for the holidays.

I'm going to try to respond to all of these posts in one reply, so bear with me.

I'm going to start with this statement: "otherwise you just end up looking like a kid in a grownups world...." because it's highly relevant to the answers to most of the other questions.

you see, I am a "kid" in a grownup's world, so to speak. I'm a college student who's about to graduate in less than a year with a degree in political science and a minor in public administration. After that I plan on achieving a Masters degree in Regulatory Affairs in one of the Nation's first programs of that sort. It's basically a highly specialized law degree. I don't know much about the business aspect of things yet, and this is the first time I've ever attempted anything like this.


giorgioarmani: the money will be "going towards" covering the remaining costs of the web-applications that we have been developing, as well the hosting fees associated for the first 6 months.

mcmutt: I might be interested in offering a higher stake intially, but only if I were guaranteed the right to buy it back in the future. I don't want to give away 25% of my business initially, especially for only $5000.

react: thanks for the info bro, I need all the help I can get! To answer your questions: I have not accomplished anything, legally speaking. My Dad owns a law firm in Minneapolis (search google for "duval fda law") and over the holidays I'll be sitting down with him to get done everything I need to. (I don't get to see him that much ) I'm planning on incorporating into an LLC before the New Year, with his guidance of course. I guess I've roughly valued the company at $100,000 subconsciously, although I see it being worth a lot more than that. I will have to cover this with my Dad as well.

For your other questions: I am not going to involve any banks/credit at this point in time. Quite honestly, $5000 is not very much money, and more than anything I'm looking to involve another person who believes in what I'm trying to do, I'm going to need help once this gets going... I know I incinuated very little involvement on the investors part in the first post, and I guess I wouldn't mind that, because I know what needs to be done; it would be nice to have someone to help with the stuff I'm not well versed in yet. I guess I'm saying the investor can be as involved or uninvolved as they want, but it won't be a bank.


Valley: I'm working on it! 90% for $5000? You've got to be joking me. I would never work this hard and give 90% of my work away for $5000.

Lastbutnotleast: here it is

Mattaw101: investor gets the $5k back, plus 5% of all future revenues, unless of course they wanted to sell it.

Soniqhost: I do have a business plan, although after reading most of these responses I don't think it's as good as I thought it was.

Maverick123: plenty of companies have found funding before they launched. I'm not worried about this, I just need to find the right person. Anyways, as the website currently is, I'm earning about $30-$40 a month off Adsense from it. I haven't launched it yet, nobody knows about it, and it's missing all the features that I'm working on implementing. When I finishing integrating all the features and get everything functioning properly, (as someone mentioned above) I expect the user base to expand pretty rapidly. US Politics is a very hot topic right now, with the Presidential elections coming, and I intend to use this to my advantage. When I launch the app that the $5000 will be funding, it won't matter if there's a Presidential race going on or not, people will use the site.

MOG: I do have a business plan that is clearly structured, (although I'll be re-doing it now!) and I'll be covering the rest of the legalities and such in a few days. As I wrote in the first post, if you were to have PM'd me, I would have gladly been more forthcoming with the information. I do have an exact plan of action and proposal, I just want to talk to someone on the phone about it, it's not something that can be discussed through PM's or a forum obviously! Thanks for the inital quote too!

So that's about it I guess.

 

No ones going to give you 5000$. All you have is a social networking script with 30 members. Grats. If anyone here does give you money, he's an idiot and I won't feel bad for him if he gets scammed

 

right now you're a kid with a bunch of code, prove it then ask for investors, start small and grow, get known and build up a rep, both here on DP and other internet places, you only have 84 posts, 2 of them being in this topic, network a bit and maybe you will meet with success, i wish you the best luck in this venture!

note: building an I trader rating helps a lot in credibility!

 

While the above two posts by Mattaw and Remotay may seem a bit harsh, it is true - I'd be hardpressed to push in $5K for such a project for a 5% stake - unless you're seeing 500 visitors per day which doesn't seem to be the case with 37 members and a PageRank PR0 ... not that the latter is so essential, but most investors will want to see a bit more hard numbers...

all the best,
Rob

p.s. the project (and domain name) are very interesting tho' !

 

A fast tip, you may want to go that way, offer a % for the service you require instead of hard cash, some people may view that better.

If you ever need advice or a fast hand, pm me your messenger address and we can chat about it =]

 

A lot of pessimists in here, but I'm intrigued. Once you have all of your ducks in a row, feel free to drop me a line and we can chat.

 

thanks for the kind words (to those that left them ).

mattaw101: what exactly do you mean offer a % for the service? like give the programmer a %?

RTM: thanks! do you really like the domain name?

Scotia King: I'll be in contact shortly after the New Year, granted I accomplish everything I intend to by then.



thanks everyone