I recently started an LLC with a friend and we developed and manufactured a product, but we really need an investor. We do have a rich friend and he wants to invest, but we don't have a good idea on how to handle it.
What do we need to watch out for? What percentage of ownership is reasonable?
We started selling our product online and have spent only around $6,000 total. He said he thinks it will take $250,000 to really get this going. He has the money, but we don't want him to take over the company.
Any advice or ideas would be really helpful.
Well, it's not really all about what he thinks, it's what you think your business needs and is worth. It's pretty tough to set a worth for a startup. Here is how I would start if I were in your shoes.
PS. You can always structure a deal where the investor gets more share of the profits, but less input in how the business should be run, based on the type of stock you issue.
Hope this helps.