Company looks like this:
investor = input money only 30% share
founder/developer (me) = input money ( about 1/2 what investor has ) and tons of sweat equity 1+ year 40% share
developer = sweat equity only 4 months 10% share
designer = sweat equity only 4 months 20% share
we have a working system, with a handful of subscribers and more every day.
we are covering the expenses of running the system, and are starting to generate a small amount of cash flow.
Investor wants money back ASAP, and his share of the "exit" if we sell
I dont really want to take any money out right now
developer and designer want a share of the incoming revenue
what are some options around doing this ?
so lets say this:
investor has put in 20K cash
I have put in 10K cash plus work with a FMV of say another 10K
developer has put in work with a FMV of 10K
designer has put in work with a FMV of 10K
then lets say incoming revenue is $5000 in a month
and expenses are $500.
1350 to investor (30%)
$900 to designer
$450 to developer
$1800 to me as deferred payment (debt)
so everyone continues to work, and add value ( except investor )
is that a reasonable revenue share model ? (based on percentage)
should the equity ownership change for me vs. others taking money out ?
should I take my share out ?
Im curious to why your investor would want to leave after your company is launched and making money. If you feel your company is solid and has potential then you really need to scramble to either buy him out personally or find an investor to take his place.
My personal rule of value is that a company is worth about 2-3 times what it earns in subscription revenue per year. So if your company earns $4500 month it would be 108,000 - 162,000. If your investor owns 30%, he can expect to get 30% of those amounts (32k - 48k).
If you were to pay him yourself directly, you would own his 30% share. You could find the right investor, since your company is more mature, that will buy 10% of your comapny for the amount it will take to buy out your current investor.
A lot of this depends on how you structure your company. When i have worn my investor hat, I have not seeked a dividend, and have gotten nervous when a company would take out its profits to pay investors full dividends based on monthly income. My personal prefrence is to see continued re-investment of earnings. This differs based on what investor you deal with, but usually is the case for startups, and small companies.
Again, do your best to buy out your investor, and perhaps the equity you gave to your developer and designer. I think the hard lesson for you in all of this will be not to give away the house when trying to build a new business. I dont know your financial situation, or if you could have built this product without any investor or even outside developers.
If you can act as your own Angel investor, or series A VC, then you are golden. If you are the sole owner of a profitable startup, it is far easier and less complex to skip to what would be traditional series B funding (not based on amounts, but purpose). Think of investors as fuel for your engine, not the actual metal. You create the engine yourself, and investors pump in the fuel for marketing, growth, and operations.
Also, a lesson to be learned is to properly discuss an exit with anyone who invests. You dont want a hostile investor that changes their mind just when you are getting off the ground. This usually is the case with bad family and friend investments. Have a talk with your current investor and find out how much he wants for his exit. Next time, penalize investors for early exit, where they can only get the money they invested plus some small interest amount if they were to exit early.