How much equity in exchange for angel money?
I am not sure what the going rate is for angel money in the software space is it 100k for 10% equity?
2 Answers
Typically, angel money is a bridge loan to your A-round. So, no real equity is given up until you do your first round. The benefit of this is that you don't have to set a price, which is not good given you really have not built anything yet.
You also usually give a 10-20% warrant kicker for the angels taking the risk.
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Great answer, as so often from you. :-) "price, which is not good" -- do you mean it's good that no valuation of the company is done, as the valuation would be very low at this early stage? – Jesper Mortensen 14 years ago
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@Jesper. Thanks for the kind words. Yes, the valuation will be low when you take angel/seed money. That is bad for you and angels. You typically want to have VC or a big money investment set the evaluation since they will do that anyway. Also, if you created value with the seed money, then your evaluation will be much better. – Jarie Bolander 14 years ago
This equity is going to be potentially expensive - meaning you'd have to give up more equity for less money - so you'll want to minimize that risk by taking on "convertible debt" rather than pure equity.
There's also no real "going rate" for equity - it's a function of the opportunity, the team, the space, and what kind of traction you've already shown. An experienced team in a great market that already has paying customers may get $500k for 10% while an inexperienced group in a somewhat desirable market with little traction may have to give up 30+% just to get $100k. It's all relative.
