I am working on the project which is in its pre beta stage. This is a web based service that allows to distribute some content in a printed format. I got several offers from investors and printing companies regarding partnership and funding. Since I have a pre-beta version yet I have a lot of questions on how to deal with partners/investors.
Depends on the investor..
Best thing to do is not use investors..
Try to run it off its own revenue. or get a loan.. 20% 30% and 40% seem high.
1% seems high for a B2b Product with lots of potential.
Try to market the product yourself. For a web app. most of your expense is the development and then foollowed by marketing and customer service.. Try to do those two things yourself and grow organically.
If it makes 200k a year and you have 100% ownership you get 200k!
If you give away 40% of your company, you need to make $333k a year to make the same exact money for yourself. The rule with investors is AVOID them.
In todays tough economy, with banks not giving anything on savings, you can find a loan (family and friends) for a lot less than the equity an investor would require. Plus, there are other complications from investors including disputes, law suits, expenses in agreements, conflicts, and diluted ownership.
I agree with Franky, UNLESS the investor can deliver some strategic advantage that you need to make the business work. ie. you cannot do without them.
If you are going to take an investor on board, you should definitely have a signed agreement drawn up by a lawyer.
You will also need to negotiate with them. Try to find out what kind of deal they want before you offer anything concrete.
In addition, an investor should always bring more than just money to the business. As Franky has pointed out, you can get money from a loan, credit cards (not recommended!) or friends and family. So what else are your investors offering?