Startups ask me “How much money should I ask for?” The simple answer is the absolute minimum amount you need to make your plan work. Some entrepreneurs try to start with a huge number, hoping they can negotiate and close on a smaller one, while others understate their requirements, in hopes of getting their foot in the door with an investor.
Neither of these strategies is a good one, as both are likely to damage your credibility with potential investors, even before they look hard at your plan. Here are the parameters you should use in sizing your request, and be able to explain in justifying your request to investors:
- Consider implied ownership cost. If your company is early stage and has a valuation under $1M, don’t ask for a $5M investment. The investor would be buying your company five times over, and he doesn’t want it. If your valuation is around $1M, you can validly ask for $200K-$300K, and offer 20%-30% of your company in exchange.
To read the full, original article click on this link: Startup Professionals Musings: 8 Ways Entrepreneurs Can Size Investment Limits
Author:MartinZwilling
