HN Explorer

Crazy investment offers

11 points by spiggytopes ↗ HN
I'm founder of a two-man bootstrapped company writing B2B financial risk analysis software out of London. Lots of interest, we're in advanced due diligence with a couple of very large banks and expect the first sales and rapid growth in the next couple of months. So far, so good.

We were toying with looking for some angel investment, and about eight weeks ago were introduced to a local angel investor. After a a few meetings and lunches he came up with the following offer:

- Investor puts in £200k in return for 20% of the company. Rather more than I wanted to part with but OK as a starting point for negotiation.

- Investor promises to help drive company growth as he has contacts and experience, wants to be involved. Not ideal as we have no idea how he'd perform - in a two-man startup we can't carry a third person who wants to help.

- Investor requires the company to pay him back the £200k at 12% interest rate, personal guarantees no doubt required but I didn't stick around long enough to ask.

The reason the offer was interesting was the light in which it showed the investor. To make such a bizarre offer (basically, to lend us money at a crazy rate, and in addition to demand a large chunk of the company in return for the unproven value he said he could add) made me ask: what would he be like to deal with on a day-to-day basis?

We walked away.

What other crazy offers have startup founders seen?

6 comments

[ 3.0 ms ] story [ 25.9 ms ] thread
illektr1k
"I have a great idea for an iPhone app. You'd develop it and we'll go 50/50"

<cue communal groans>

ohashi
'I just need someone to make it'
chris_dcosta
I laughed when I saw this.

I've come across my fair share of freeloaders.

What gets me is that they never ever see it like "you do the work for nothing, you take all the risk, and I reap half of everything you earn, and if you don't make a fortune I want everything you have".

pdm55
IIRC Warren Buffett doesn't allow the independently-run businesses that are part of his conglomerate to borrow from the banks. If they want to borrow money, he will lend it to them at 15%. So I guess that is a yardstick to judge oneself against. Could I repay a loan where the interest rate is 15%?
Seanambers
It's a great way to prevent money from being wasted on projects that have a low return on investment(IRR-internal rate of return). In other words only the projects that generate a sufficiently large return are feasible investments. Buffet does not like to waste resources,time and money :)
teyc
Might as well shop around after you have some sales. Tried angellist?