Results 1 to 18 of 18
  1. #1
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default Business-related question, about investing in a startup

    I have been offered an opportunity to invest and participate in a project and run it at the same time, functioning as CEO. It's a potentially very lucrative project in an industry that I know quite well, and it is definitely not some type of scam.
    The product in question is gambling-related, both offline and online. No revenues yet, since the launch is planned for November/December 2021, which can be achieved. Technical infrastructure is already in place (already developed by my future partners). A company with a license for the project is already in place.
    After extensive market research, revenues could be expected to be in the low $xx million within 12 months, $ 50-100 million within 2-3 years.
    A suggestion is on the table where I invest $50k, my 2 partners who hold 80% of the company in question invest another $50k. The $100k will cover the expenses for the launch and initial marketing up to the point where the project is generating a profit.

    I suggested that I would not want a salary (I do not need one), but I would take 25% of the company instead.

    Do you think that, under the circumstances, the share percentage I am asking for is fair?

  2. #2
    Triple7 is offline Private Member
    Join Date
    January 2015
    Posts
    2,819
    Thanks
    2,046
    Thanked 2,444 Times in 1,322 Posts

    Default

    How much they already invested?

  3. #3
    Sherlock's Avatar
    Sherlock is offline Public Member
    Join Date
    December 2013
    Location
    WC
    Posts
    4,183
    Thanks
    1,263
    Thanked 3,283 Times in 1,825 Posts

    Default

    I do not think it is fair. If I understand correctly, you would get extra 5% points for (let's say average salary) for business that has to have value of hundreds of millions? If you really believe it has the value, the 5% is way too much. But all the numbers and the setup does not make sense to me (probably because it is too little info), so based on that I might be wrong.
    We are all bloodsucking ticks, hungry, devious
    each one latched on to the ass of the previous
    when the last and the first latch on it can be shown
    ass-blood sucked by the first from the last is his own

  4. #4
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Quote Originally Posted by Triple7 View Post
    How much they already invested?
    approximately $25k

  5. #5
    Triple7 is offline Private Member
    Join Date
    January 2015
    Posts
    2,819
    Thanks
    2,046
    Thanked 2,444 Times in 1,322 Posts

    Default

    Quote Originally Posted by Sherlock View Post
    I do not think it is fair. If I understand correctly, you would get extra 5% points for (let's say average salary) for business that has to have value of hundreds of millions? If you really believe it has the value, the 5% is way too much. But all the numbers and the setup does not make sense to me (probably because it is too little info), so based on that I might be wrong.
    The start-up has a potential value of hundres of millions.

  6. #6
    Triple7 is offline Private Member
    Join Date
    January 2015
    Posts
    2,819
    Thanks
    2,046
    Thanked 2,444 Times in 1,322 Posts

    Default

    Quote Originally Posted by RedFoxLotto View Post
    approximately $25k
    Than it seems to be not fair to me what they offer. Or they value "the idea".

  7. #7
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Quote Originally Posted by Sherlock View Post
    I do not think it is fair. If I understand correctly, you would get extra 5% points for (let's say average salary) for business that has to have value of hundreds of millions? If you really believe it has the value, the 5% is way too much. But all the numbers and the setup does not make sense to me (probably because it is too little info), so based on that I might be wrong.
    The business currently has no value (meaning no revenues), although it does have potential. But the actual result will depend on the way the marketing and managing is done, which will be my task.
    My partners will not be involved in the day to day work. Also, for the project I have to relocate to a foreign country and be the person on the ground there, while my partners will not be in that country. My expenses for relocating and paying rent, health insurance etc. are not a small item either, like $25k per year.

    According to my research, 5% of the company seem to be ok for a CEO in addition to a salary. But considering that a) I do not get a salary, and b) I am also an co-investor, I think a larger share is certainly justified.
    With my suggestion, the end result would be that out of 100 shares, 25 are mine, and my partners still hold 55 shares combined (20 shares are in the hand of a local who owned the company originally. The company was inactive, and my partners purchased the 80 shares for app. $25k)
    Last edited by RedFoxLotto; 13 September 2021 at 2:02 pm.

  8. #8
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Assuming a return on revenue of 8%, and a (minimal) revenue of $10 million, that means total profit of $0,8 million. 25% of that for me would be $ 200k, which would be a lowball salary for a CEO of a company with that size.
    My two partners would be still making $ 220.000 each, with only a minimal workload.
    Of course, I'd be making a lot more if the company generates higher revenues, but the success would mainly depend on my performance. Add to that the risk I take by investing. So, 5% is definitely way too low IMO. It would mean $40k per annum for generating $10 million in revenue, or $400k p.a. if the revenues reach $100 million.

  9. #9
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Quote Originally Posted by Triple7 View Post
    Than it seems to be not fair to me what they offer. Or they value "the idea".
    The idea itself does have some value, of course. But everything depends on the online and offline marketing strategy and its implementation, and I will contribute lot to that strategy. I will also be making the staff hiring and budget decisions.

  10. #10
    Sherlock's Avatar
    Sherlock is offline Public Member
    Join Date
    December 2013
    Location
    WC
    Posts
    4,183
    Thanks
    1,263
    Thanked 3,283 Times in 1,825 Posts

    Default

    The "CEO" is just 3 words. I am also "CEO" of my small companies. It means nothing. The difference is that share of the company is share forever. CEO can be fired if major shareholders do not like him anymore (which is extremely likely I guess by startup). Then they have to pay the extra 5% points.

    But I misunderstood the revenue. I thought it is a profit/net revenue. I do not know why you quoted revenue here, it is just a turnover, which is irrelevant to your question. If expected profit is only 800K, then your claim is more reasonable. Still I would not go for it as owner. But take it with a grain of salt, I simply do not believe in co-ownership. It is much easier to do things alone and grow alone from my experience. Not a bad thing to give employees cut from revenue or somehow connect salary with results, but I would never give anyone a share. I did it so many times and every time it failed. On the contrary: doing things alone was smoother than I thought.

    I was now offered something like that from potential minority shareholder (who would have much lower share than 20%, but the profit would be much higher), but I do not like it. Good luck to you. It is just how I see it. I wish you to get as much as possible.
    We are all bloodsucking ticks, hungry, devious
    each one latched on to the ass of the previous
    when the last and the first latch on it can be shown
    ass-blood sucked by the first from the last is his own

  11. #11
    Strider1973's Avatar
    Strider1973 is offline Private Member
    Join Date
    November 2012
    Posts
    331
    Thanks
    225
    Thanked 208 Times in 140 Posts

    Default

    "it does have potential" -> we know this from website sales. Everything has "potential" when you put in the right amount of work, but it's another story if it's worth it.

    "
    20 shares are in the hand of a local who owned the company originally" -> this doesn't make sense. Why should a former owner get 20% of the value of a "potential" multi-million company without being involved except for holding 20% of a currently more or less worthless company? Why don't you just start a new company without the fomer owner?

    And honestly, don't you think that investing 100k to create revenues of
    $ 50-100 million within 2-3 years sounds too good to be true?


    Sorry for my sceptical words. I'm not saying it won't work, just be careful with these extremely high expectations.
    "Semper paratus!"
    My BTC Address: 1F11EJvSAab5vMQgGWGQMASr9T7LCkZjvb

  12. #12
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Quote Originally Posted by Strider1973 View Post
    "it does have potential" -> we know this from website sales. Everything has "potential" when you put in the right amount of work, but it's another story if it's worth it.

    "
    20 shares are in the hand of a local who owned the company originally" -> this doesn't make sense. Why should a former owner get 20% of the value of a "potential" multi-million company without being involved except for holding 20% of a currently more or less worthless company? Why don't you just start a new company without the fomer owner?

    And honestly, don't you think that investing 100k to create revenues of
    $ 50-100 million within 2-3 years sounds too good to be true?


    Sorry for my sceptical words. I'm not saying it won't work, just be careful with these extremely high expectations.
    I know it sounds too good to be true. But the startup costs are that low because we have a marketing plan that is very scalable, so very low initial expenses. Also, it is a very unique market situation (can't go into details here). I have done the research - the current market leader has a product which is simply a joke, but they generate $35+ million in yearly revenues right now.

    About the local guy and his share of 20% - he just did not have the expertise, tech, nor capital to do anything with the company. His only asset was the license.

  13. #13
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Quote Originally Posted by Sherlock View Post
    But I misunderstood the revenue. I thought it is a profit/net revenue.
    Revenue is defined as gross sales = turnover = top line
    profit = bottom line
    ROR or return on revenue = profit divided by gross sales

    At least that has always been my understanding, correct me if I am wrong.

  14. #14
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Expectations of the potential and market put aside, what about my main question - what is a fair deal here in terms of percentage of shares of the company?

  15. #15
    baldidiot is online now Private Member
    Join Date
    January 2010
    Posts
    4,440
    Thanks
    409
    Thanked 2,013 Times in 1,327 Posts

    Default

    What are the others bringing to the table other than the investment? Or is it just that they hold a license that's hard to get?
    onlinegamblingwebsites.com - Formally known as goodbonusguide.

  16. #16
    RedFoxLotto's Avatar
    RedFoxLotto is offline Non-sponsor Affiliate Program
    Join Date
    February 2020
    Location
    Germany
    Posts
    67
    Thanks
    7
    Thanked 46 Times in 16 Posts

    Default

    Quote Originally Posted by baldidiot View Post
    What are the others bringing to the table other than the investment? Or is it just that they hold a license that's hard to get?
    Well the license is one thing, yes. They also have the technical platform needed for the project. A re-brandable android app and a platform for a website, which I guess may have cost €30k to develop. Both the app and web platform were developed for a different project though, so IMO only a fraction of the developing costs can be taken into account here.

  17. #17
    Strider1973's Avatar
    Strider1973 is offline Private Member
    Join Date
    November 2012
    Posts
    331
    Thanks
    225
    Thanked 208 Times in 140 Posts

    Default

    If it's such a great opportunity then you should go for a 51% share.

    If necessary, just say that you will work without being paid a salary but that you need the majority share to be "fully committed". You should have enough cash flow to cover your own expenses with your lotto sites, so I guess you can live without getting paid by the new company for a while.

    It seems that there are already too many people involved who won't be able to put in the amount of work required. So go for the majority share or it probably won't end well.
    "Semper paratus!"
    My BTC Address: 1F11EJvSAab5vMQgGWGQMASr9T7LCkZjvb

  18. #18
    gil.langelaan's Avatar
    gil.langelaan is offline Private Member
    Join Date
    July 2018
    Location
    Johannesburg
    Posts
    940
    Thanks
    105
    Thanked 295 Times in 234 Posts

    Default

    Why only 25% if it's so promising startup and if you need to invest 50%? I think you can ask for more...

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •