What does a company get in return for investing in a web based startup company?
I have always been curious to know what a company gets in return for investing in a startup company that makes a healthy profit while continuing to grow.
For example: Accel partners invested 12 million into the facebook project. We have all heard of that success story, but what I don’t know is what was negotiated when Accel partners gave them that money.
Given what was settled in the facebook/Accel contract, what should be an acceptable expectation if I am seeking from a venture capital firm? Does anyone know the answer for this?
Thanks.
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Really ! Tell me why will someone vote this question down when it clearly falls within the purpose of this site and it is serious and seeking serious feedback. Why will someone continue to use this site if their questions which makes up the core purpose is considered irrelevant by some. – Geddon 11 years ago
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I didn't downvote - but since you asked, consider your question: 1) finding about accel took about 1 minute via google to find out. 2) assuming there is a relevant link between investment criteria of facebook and your situation is unlikely within the startup content 3) Tons of other posts related to VCs and expectations already exist. Many here love to share their experiences, but questions that are either unanswerable or un-researched typically get a polite downvote. – Jim Galley 11 years ago
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1) Obviously I did find out about Accel, that's why I referenced it on my question, but my question was not about that, isnt it 2)I mentioned facebook, because it was an easy example, by saying "For Example". So it really does not matter if there is a direct link or not. 3) I did research and didnt really get a straight forward answer, hence this question...... – Geddon 11 years ago
2 Answers
I don't know about that specific deal, but in general an investor gets stock, i.e. a percentage share of the company. Of course, you can also negotiate favourable terms, etc.
I'd recommend Venture Deals by Brad Feld as it covers a whole lot of this stuff.
It was an investment. For their money, they get shares. From CNBC :
With its 10.7-percent stake in Facebook, Accel is the largest outsideBut this likely has no relevance to your situation - unless you have a "just less than 3 million users" product. How / when you raise capital has to do with the business need, your business model & the stage your company is at.
shareholder in the company. Not everyone at Accel was enthralled with
the idea of investing in a site that had less than 3 million users and
no clear revenue path. But that initial investment—now worth as much
as $6.6 billion—is looking like a pretty good deal.
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