I have a brand new tech startup. The system was developed over the period of 1 year, the website is ready and it also already has a couple of customers (non-recurring). The service was launched 2 months ago. We have not even marketed it well, not done SEO either and out of the 4-5 visitors to the page daily, about 1 of them signs up. The visitors generally come through adwords, which is set at a very small budget of just $10 per day.
I have an investor who seems interested to invest about USD 100,000 in it. I am a software developer and I am new to all this. The investor is a marketer and has a very good experience and corporate contacts. He thinks he sees good potential in this service.
My gut feeling is to sell him 20% stake and give him control of marketing with some creative control. But I'm unsure.
Any advice would really help.
Start by estimating what your business is worth. Before launch your equity in the business is the hours you have spent building it times a reasonable rate, plus any out-of-pocket expenses (hosting, etc.). For a business with revenue, the valuations are made using yearly revenue and profit numbers (mostly revenue with multipliers ranging from 1-10). You can try spending more money on Google AdWords for 1 week and see what your conversion cost is and how it increases with budget, e.g. will you have to bid higher to be able to spend your higher daily max (in a niche market you might have limited opportunity). Figure out what your expenses are, potential revenue and finally a profit margin. Research valuations further and come up with some value number for the business. Consider market size and competition.
A proper answer to your question requires a great deal more factual information than what you have provided.
There is no way to ascertain what the appropriate overall valuation of the start up should be without at least knowing the specific level of technical innovation involved, the proposed business and legal terms of the proposed investment (i.e. what happens if the company is not successful), the potential interest from competing investors, the amount of money that will be required to keep the business going, the realistic revenue generating capacity of the start up and the quality of the management team and engineering staff.
I hope this answer was of some help.